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Jupiter's Microsoft Monitor Research Service helps vendors prepare for market opportunities created by new Microsoft initiatives. In addition, Microsoft Monitor helps business and enterprise users discover which strategies are most successful in dealing with Microsoft and how to best exploit the customer relationship. The Microsoft Monitor Weblog is a companion to Jupiter's Microsoft Monitor Research Service and provides additional news, analysis and insight relevant to the areas most important for Microsoft's growth in both the business and consumer marketplaces. The content on this Weblog is often based on late-breaking events whose sources are deemed to be reliable. The insight and recommendations represent Jupiter's initial analysis. As a result, our positions are subject to refinements or major changes as Jupiter analysts gather more information and perform further analysis. Feedback is welcome at mm@jupitermedia.com.

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Recent Entries
Sleepover Sunday
UK Windows XP Replacement Program
Talking Turkey, But Giving Thanks?
Microsoft's Small Biz Server Tips
Gauging Hotmail's Temperature

November 28, 2004
Sleepover Sunday #

So, what do a pair of 10-year-old and 9-year-old girls do on a Sunday afternoon? Gather around the computer and makeover mock facsimiles of one another--and groove to tunes from MSN Music.

To set the mood, the girls repeatedly played Vengaboys "We Like to Party!," a song anyone who has seen the Six Flags Mr. Six commercials should recognize. The song had been purchased from MSN Music.

For the makeover, the girls used Microsoft Digital Image Pro 10 to alter a character from the game "Harvest Moon: It's a Wonderful Life" that they pulled from Nintendo.com. The girls then took turns changing the character to suit what they wished they could look like. Giggles and fun, they took over my basement office for a couple hours before running off with their makeovers, printed out altered Harvest Moon characters, for some obscure game they created. Of course, I may need to talk to my daughter about the risks of snatching copyrighted characters from a Website, even for innocent offline fun.

I saw the computer interaction as another indication how growing up with high-tech ware impacts kids and how they incorporate it into their low-tech play. And there's something to be said about familiarity and flexibility with the products. My daughter has a Barbie makeover game on CD-ROM, but preferred using Digital Image Pro. The latter program, while more complex, is more familiar and more flexible for what the girls wanted to do.

Later, the girls played outside in the backyard, where they sang Christmas carols. The trio moved the singing to the living room where they played holiday music on the Windows Media Center PC. The romp ended in my daughter's bedroom, where the girls belted out holiday Karaoke on the Xbox using Microsoft's "Music Mixer" software.

Posted by Joe Wilcox at 06:01 PM
November 24, 2004
UK Windows XP Replacement Program #

For folks living in the UK, Microsoft has launched a new anti-piracy program that would give some people free replacement copies of Windows XP. But by what definition of free, I have to ask?

Only people who bought Windows XP on new PCs before November 1 are eligible for the Windows XP Counterfeit Project program (details here). People buying off-the-shelf upgrades or through volume licensing are ineligible.

The project is a good approach to fighting piracy and a step in the right direction. In September, when blogging about the Windows Genuine Advantage program, I argued that Microsoft shouldn't hold consumers responsible for purchased counterfeit software they thought was legitimate. The Windows XP Counterfeit Project is an appropriate, measured response, because it provides an opportunity for consumers duped into buying fake to get the real thing--and free, too.

Except, free comes with a price, of sorts. For starters, Microsoft still puts quite a bit of responsibility on the buyer, through whom Microsoft wants to gather evidence against the seller. So, UK Windows XP PC buyers need go through a product identification process (details here), which includes submission of a Witness Statement form. As part of the product identification process, the buyer must also submit the product, accompanying documentation and receipt or invoice. Pirated products are not returned.

OK, I really like the idea of Microsoft replacing inauthentic with authentic copies of Windows XP. It's a sensible approach that avoids punishing buyers unaware the software had been pirated. But I do have a problem with the amount of documentation needed to authenticate the copy of Windows. I once unknowingly bought a PC with an illegal copy of Windows. I figured it out later because there was no documentation and no Windows discs. So, what does the buyer do if there is no documentation, send in the PC? Humph. I don't think so.

What about the situation where a new PC ships with the operating system on the hard drive, behind a special restoration partition. That's a legitimate way to sell a Windows PC. But I could imagine pirates taking the approach to hide that they are using, say, a stolen product key to setup Windows XP on new PCs. If the operating system is on a hard disk and there is otherwise limited or no documentation, how can the buyer go through the identification process without sending in the PC or the hard drive? Remember, pirated software isn't returned to the buyer.

I'm also interested what incentive, other than doing the right thing, Microsoft would use to encourage buyers to go through the somewhat arduous product identification process. Given law enforcement might get involved, as part of the pirate prosecution, wouldn't many people just skip the process and so replacement offer?

I do believe the program has merit, and the approach is better than penalizing innocent Windows XP buyers. But I encourage Microsoft to streamline the identification process as much as possible and give buyers better reasons to come forward. For starters, why not let people call anonymously and use, say, the product ID number to begin the verification process? Microsoft's piracy fighters are so good, that one piece of information should be enough in many cases.

Posted by Joe Wilcox at 06:01 PM

Talking Turkey, But Giving Thanks? #

According to this InternetNews.com story, European Union and Microsoft officials will sit down tomorrow (Thanksgiving here in the U.S.) to discuss the case against the company. Withdrawal of some participants precipitated the meeting called by the judge.

A few weeks ago, Microsoft settled with Computer & Communications Industry Association (CCIA) and Novell, knocking off two more protagonists in the European case. Previously, Microsoft settled with AOL and Sun, leaving RealNetworks as the only major competitor or competitor-representative organization participating in the case.

Meanwhile, late yesterday, the Financial Times reported (here) that nearly half of the CCIA settlement payment went to trade group president Ed Black. The news is sure to drum up more speculation that Microsoft is buying its way out of the European ruling. Having listened to Ed lambaste Microsoft for years, I have to wonder what's going on here. But, I won't speculate on motives or churn up more FUD, because I don't know. And neither does the press, or at least based on stories posted so far.

I will say this: Whatever bad press Microsoft might get now, it's better than the possible eventual outcome should the courts let stand a EU ruling compelling Microsoft to ship a second Windows XP version without the media player. So, is it a surprise that Microsoft is working overtime to clear the case away? Following the CCIA-Novell settlement, Microsoft General Counsel Brad Smith explained that CCIA's European claim effectively made impossible any settlement with the EU, because of the focus on Windows XP.

So, Microsoft had plenty good reason to dispatch the CCIA claim by whatever dollar amount imaginable. Even if at the expense of some bad press, that's assuming Microsoft execs really knew or even cared how CCIA might divvy up the settlement.

Tomorrow's meeting could be significant, particularly if the judge signals the sides should engage in settlement talks. I'm no lawyer and won't even speculate what legal options are open to the judge. But, remember that the U.S. Justice Department and Microsoft reached a settlement agreement after the judge told them to do so. If Brad is right about the EU settlement roadblock created by CCIA, maybe the way is now open for serious settlement discussions.

Posted by Joe Wilcox at 02:10 PM
November 23, 2004
Microsoft's Small Biz Server Tips #

From today's microsoft.com portal is a link to a page (here) offering small businesses eight reasons to buy a server. The approach is the right one, as explained in my recent report, "SMB Market: Microsoft's Early Success Shows Way for Savvy Partners and Competitors."

I encourage JupiterResearch clients interested in selling to SMBs to read the report and then contact their services representative or me directly to set up an inquiry. Microsoft's successes and misses in the SMB market reveal opportunities for both partners and competitors. One important area: Identifying pull technologies that generate sales of other products.

Posted by Joe Wilcox at 08:35 AM
November 22, 2004
Gauging Hotmail's Temperature #

I've gotten some requests from reporters for analysis of today's Hotmail upgrades. I'm going to list out each new feature and why it is significance:

* More free storage capacity (250MB) and larger attachments (10MB). The change increases Hotmail's value for people using the free service. More traffic is good for MSN's advertising position. The question: Will some paying customers see the storage and attachment capacities as good enough and skip renewing the paid service?

* Paid subscriber storage up to 2GB. For 20 bucks a year, Hotmail subscribers get twice the storage of Google's GMail and attachments up to 20MB. I'm not convinced most people need that much storage capacity, but the attachments could be quite useful. Over half of U.S. households now have digital cameras. Who wouldn't want to send grandma pics of the new baby at full resolution? But that high-res file would be a big one, particularly if taken with a 6- or 8-megapixel camera.

* MSN Web Messenger, available in 25 countries. Catch-up feature is important to keep pace with AOL and Yahoo! and extend Hotmail's utility.

* Local domains in five countries (Germany, France, Italy, Japan and United Kingdom). Combined with the 25-country, 15-language reach of MSN Web Messenger, Microsoft better shows that Hotmail is a global, rather than U.S.-centric, service. The domain extension also opens new e-mail address possibilities, refreshing what has to be a pretty exhausted list of choices off of hotmail.com.

This afternoon, a reporter asked what value Google, Microsoft and Yahoo! get out of offering e-mail services. My response: Stickiness. These services are more likely than many others to stick to the customer--or, said another way, the customer is more likely to stick with the service. An e-mail address is more than just for communication. It's about identification, too. An e-mail address is the consumer's identity with friends, family, coworkers or online commerce sites like Amazon. Like a phone number, the e-mail identity is not something the consumer would want to change often.

Earlier this year, I dispatched a domain name registered in 1995. Off that domain, I maintained the same e-mail address for nine years. Changing e-mail addresses proved to be a burden. I contacted hundreds of people and about 50 Websites/E-Commerce operations to update then with the new e-mail address. What consumer would want to go through that process?

Of course, people might maintain different e-mail addresses and for different purposes. I've had MSN and Yahoo! identities going back to 1995 and 1996, respectively. But there is still one identity, one e-mail address that I give out to most folks.

GMail stickiness is important to Google, in particular, as is the new desktop search utility. As my colleague Gary Stein notes in this blog, switching search engines is easy. So Google rolls out high-stick services/software.

For Microsoft, Hotmail opens a wider gateway into the larger MSN constellation of services. Some of the other free services, like the calendar, add another layer of stickiness, too.

Posted by Joe Wilcox at 04:02 PM

Right Reasons, Wrong Time #

From today�s microsoft.com portal there is a Tablet PC promo. Reads the tagline: "Ho Ho Go! Top 10 reasons Tablet PCs are the perfect gift for on-the-go students." The message behind the reasons (here) is right, but the timing is wrong. Microsoft needed to ramp up Tablet PC marketing before September not December.

The problem: Twice now, Microsoft missed the back-to-school buying season (See blog here). Like its predecessor, Windows XP Tablet PC Edition 2005 reached mass market after the kids had returned to school.

Of course, promoting Tablet PC for the holidays is a good idea. Just better would have been before school started. And if Microsoft really wants to promote a high-ticket item like Tablet PC for the holidays, the 10 reasons have to change. The reasons in the list are OK for parents shopping with their adult children entering college. For the holidays, I'd recommend something that appeals more to the students.

So, why not promo with something more like a Letterman-style "Top 10" list? It wouldn't hurt to emphasize the cool factor and features for having fun, too, such as handwritten IM chat. C`mon, how many teenage students would want a Tablet PC from Santa because, quoting from the Top 10 reasons list, "You can integrate ink into everyday programs, including Microsoft Office System and many third-party programs" or "Support for zero-configuration wireless connectivity makes it easy to connect to local hot spots."

The makings of a good list of reasons are in the Microsoft "10 reasons" primer. They just need to be drawn out. "Grab-and-go docking" is snappy. So is term "gestures." There is plenty of other salvageable copy to create something more appealing to the students. I would contend that during back-to-school season, promo has to appeal to the parent as primary decision maker. For "Ho Ho Ho" season, the target should be the students. So, the promotion needs to match the time of year and the audience. Microsoft Tablet PC partners take note (no pun intended).

Highly recommended reading: "Tablet PCs: Spurring the Market for a New Generation of Mobile Computing" by Michael Gartenberg and Andrea Wood.

Posted by Joe Wilcox at 08:33 AM
November 19, 2004
Maroon 5, Sunday Morning, Karaoke and C500 #

Maroon 5's new music video, "Sunday Morning" (here) features the Orange SPV C500 Windows Mobile-based Smartphone; the U.S. SMT 5600 model is essentially the same but with Windows Media Player 10.

The music video features a Karaoke bar, where at several points someone uses the C500 to either capture or watch a video of a woman singing to the music. The phone can do either--capture or play video--and, for fun, I captured some of the music video as it played on my computer.

There is a lot to be said about "Sunday Morning" and the Windows Smartphone's musical debut (or so I assume):

* It's not unusual to see high-tech props used in entertainment such as movies or television. But, too often, particularly with Macs, the gear is little more than prop. Here, the Smartphone plays a functional role in the music video.

* The phone is fairly new to market, yet captured someone's attention--who knows, maybe a band member or director--enough to be used in the music video. I think that says something about the Smartphone's utility, features and style.

* It's refreshing to see a handheld device other than an iPod featured in mass-market entertainment.

* Here is more anecdotal evidence that people see the cell phone--or, in this case, Smartphone--as much more than a telephony device, given the right context.

* The video will expose millions of people to the c500 Smartphone, and that's got to be good for Microsoft and its partners. Will people rush out to buy the C500 (or SMT 5600) because their favorite band features the phone? Apple thinks people will buy a U2 iPod, right? I'm wondering if style and capabilities will be the bigger draw.

Posted by Joe Wilcox at 12:17 PM
November 18, 2004
Huh? MSN and Overture, Again? #

Some of my colleagues and I have been scratching our heads over today's announcement that Microsoft would extend Overture paid search capabilities for another year. So I've pulled together some initial reaction.

My first take:

Why now? The Overture deal wasn't even set to expire until next June. What benefit does Microsoft get from announcing in November it will continue to use the Yahoo! Overture service for another year? I've got to wonder what the benefit is to both companies, particularly considering Google's search-and-services position.

As much as anything, the announcement demonstrates just how difficult it is for a company, even one as big as Microsoft, to launch a search service from scratch. The new MSN beta search site is rough around the edges; by no means ready for mass consumption. If basic search capabilities aren't ready, how can be paid search facilities? Then there is the business of putting together advertiser relationships and demonstrating the technology can deliver.

Gary Stein:

A relationship with Overture makes them money; their own would have a new cost associated with it. They may be in this limbo space where they need to show an Overture + X return for building their own system and network of advertisers (the second being the hard part, of course). Although I imagine the sales team is itching to get selling big search deals as well. Maybe they'll Ask Jeeves it? Sell Enhance Listings and let Overture handle the rest. I bet the deal doesn't prohibit them from selling search on their own.

Nate Elliot:

This news seemed a bit strange at first. I mean, MSN has already done the heavy lifting by building its own organic search engine. Surely building its own paid listings engine will be a piece of cake. But when you think about it, it's good to build in some extra transition time. Overture claims somewhere near 200,000 advertisers, all of whom bid against each other fiercely and drive prices up. It'll take MSN a long time to build that kind of advertiser base, and until they do they'll be stuck with a much less competitive market and therefore lower prices -- witness the drastically lower prices at FindWhat or the other second-tier engines. If MSN is able to build their advertiser base slowly, and phase in their paid listings over time, that can only be a good thing for them.

Posted by Joe Wilcox at 01:18 PM

Fire or Fox in the IE Hen House? #

I've gotten so many questions about Firefox versus Internet Explorer, a blog is absolutely warranted. The No. 1 question: What does Firefox's increased popularity mean? Related: What impact will a new browser war have on vendors offering online services?

The second question is easiest, so I'll start there first. If Websites are developed based on World Wide Web Consortium sanctioned standards, there should be little difference (Caveat coming in a few sentences). Services should be consumable about the same in any W3C-compliant browser.

However, Windows XP Service Pack 2 blocks many scripts by default, which, in my testing can really cause problems using Internet Explorer. Firefox might actually better support scripting used by some Websites and so work more smoothly than Internet Explorer.

Websites using proprietary Microsoft technologies like ActiveX will find problems with other browsers. That said, they'll also have trouble with updated Internet Explorer. Windows XP SP2 also blocks ActiveX by default, although the blocking is fairly easy to turn off when needed.

Circling round to that "what does it mean" question, BetaNews has a two-part interview (here and here)with Gary Schare, Microsoft's director of Windows product management.

Gary gives lots of reasons why Microsoft isn't doing more to advance IE. Some of them I find baffling. Regarding tabs, Gary said: "For architectural reasons, it turns out you can't just add tabs via an add-on into the IE app itself. You can get tabs by running a different app like those other browsers that build on the IE platform, so it's a nice option for people.

We've looked at whether you can add tabs through a browser helper object or some other way of extending IE, and it turns out you can't. Then of course the Web developer stuff is also that core platform changes and wouldn't be deemed an add-on. The challenge there, as we have been kind of public on our blogs when discussing with Web developers, is backward compatibility."

I don't quite grok his reasoning, unless the problem is Internet Explorer's integration into Windows and other developers creating products using the browsing engine. Still, Microsoft can add a search toolbar, why not a tabbed view?

And as I blogged previously, Microsoft could get some good utility out of tabs, such as launching with two home pages, MSN and microsoft.com.

The point: Microsoft hasn't decided to separate browser development from the operating system. If status quo stays, it's a fair bet there will be no major Internet Explorer upgrade until Windows Longhorn ships, presumably in 2006. That's a great opportunity for Mozilla or the folks over at Opera to keep innovating and continuing to extend the browser motif.

Online vendors should assume that some people use--and have used--multiple browsers just fine. Whether Panasonic, Samsung or Sony TV, there's no problem as long as the devices support broadcast standards and so are capable of receiving the same channels in the same way. Likewise, compliant Websites should work well with compliant browsers, regardless of the developer. But online vendors should be concerned if, say, Firefox deviates from W3C standards or creates a model necessitating support for multiple plug-in architectures. That's old browser war territory no needs to revisit.

Outstanding question: Is Firefox more secure than Internet Explorer? The answer will take increased popularity that makes the browser a bigger target for hackers. If the browser outfoxes that firestorm, Microsoft had better run for cover.

Posted by Joe Wilcox at 12:25 PM

Finally #

Finally, another portable music player manufacturer is going to put some serious marketing money behind its products, or so says this Reuters story from Thursday. Creative will spend $100 million next year marketing music players.

As I blogged about previously (here and here), maybe one major reason for iPod's success is good marketing. Sure, the iPod hits all the right features (See Michael Gartenberg's report, "Portable Media Devices: Beyond Music"), but there's something to be said for good marketing--and lots of it. So good, I wonder when iPod goes the way of Kleenex, as identifier for all products in its category (Some could argue it already has). If judged solely by marketing or hype volume, iPod looks like the only portable music player available. Creative, iRiver, Rio, Samsung and many other manufacturers know otherwise.

The Creative marketing campaign is just what Microsoft needs. Creative players support Windows Media Audio format, in its rights protected and unprotected form, and that's good for proliferating the format against Apple. Make no mistake, as I explained in my report, "Protected Audio Content: Consumers, Vendors Line Up Behind Either Apple or Microsoft," Apple and Microsoft are engaged in the early stages of a DRM format war. Apple leads in consumption, but Microsoft's edge is distribution.

The iPod's popularity and iTunes Music Store download success are problems for Microsoft and its partners. Getting the WMA-supported music players and Windows Media Player right is the first step--and some of the devices I tested recently nearly close the gap on iPod/iTunes. But people have to know about the products, and that's where marketing matters most.

Just ask Intel. The company's products are nearly invisible, because they make up part of the guts of a computer. And most PC manufacturers ship Intel microprocessors on most computers. But the company rightly recognizes the importance of marketing, if people are going to know Intel products and ask for them in new computers. So, Intel markets, markets, markets the hell out of the Intel Inside and Centrino logos.

Now, finally, another music player manufacturer is putting up some marketing money muscle. And Creative offers a much broader array of support products than Apple. My advice to Creative: Make sure you have a good story to tell about what your music player is better with your other products, like your speakers and audio cards. Lots of PCs ship with Creative sound cards. Assuming consumers are aware and like what they hear, Creative could use the familiarity in its messaging. How Creative knows audio and how to deliver digital music with the most impact, the best audio fidelity; and how that experience makes its music players "the sound choice."

Posted by Joe Wilcox at 09:03 AM
November 15, 2004
Adobe Shares and Shares Alike #

Today Adobe announced Acrobat 7, the next-major version of its PDF authoring software. Acrobat 7 is a major upgrade that poses some threat to companies backing proprietary file formats. Among them: Microsoft.

The release is significant for three reasons:

* Adobe is extending collaboration features to its Reader product. The change means that anyone using reader would be able to markup documents created in the full-package product. The move leverages Adobe Reader's hefty install base. About 80 percent of U.S. households have the software installed on their primary PC.

* By supporting Intel-backed U3D, Adobe is able to offer sharing, collaboration and editing of complex, 3D documents. So an architect would no longer need worry if clients had CAD software capable of reading complex documents. The architect could produce the CAD document, save it to PDF and e-mail to the client, which would be able to edit/collaborate the document in Adobe software.

* The software supports more than just 3D documents. Users can pull in files from almost any document source. So it would be possible to assemble a complex PDF document with pages from Word, Excel spreadsheets, Web pages and AutoCAD drawings, among other file source types. Once assembled, users would be able to edit and collaborate on the assembled pieces, even if users don't have, say, Excel or AutoCAD. Disalike file sources become alike when saved as PDF using Acrobat 7.

I see today's announcement as building on momentum Adobe started when it chose to give away Reader for free many years ago. Adobe also chose to open-spec its PDF format, which has helped proliferate its use. Since, vertical industries have certified derivative forms of PDF for specific uses.

Adobe's approach is in stark contrast to that of Microsoft, which takes a proprietary tact with respect to Office file formats. Everyday, I see more and more documents and presentations saved as PDF, many of them originally created in Office. Adobe has extended its approach by embracing multiple file formats and creating a mechanism to bring them together into one electronic document.

Posted by Joe Wilcox at 09:41 AM
November 12, 2004
Whither WordPerfect? #

While earlier in the week Microsoft and Novell settled antitrust claims with respect to NetWare (see blogs here and here), a dispute over WordPerfect remains unresolved. Today, Novell filed an antitrust lawsuit against Microsoft, alleging anticompetitive behavior affecting WordPerfect during 1994-96 (See Novell and Microsoft press releases here and here).

While Novell and Microsoft duke it out in court over alleged past offenses, the present shouldn't be ignored. Corel continues to develop WordPerfect, which remains a powerful productivity suite and viable alternative to Microsoft Office. My concern: That the lawsuit's crossfire will catch Corel and today's WordPerfect. I would strongly encourage both Novell and Microsoft to keep the past in the past, in their public posturing as the case advances. In fact, a strong Corel and WordPerfect could benefit Microsoft's position that Novell mistakes contributed greatly to WordPerfect's decline in market share. So Microsoft has good reason to keep Corel and today's WordPerfect out of the foray.

A little history: Novell bought WordPerfect in March 1994. The announcement broke during the FOSE trade show here in Washington. At the time, WordPerfect had enormous market share but was struggling to make a successful transition to Windows. WordPerfect 5.0/5.1 for DOS was a hugely popular release. I see the release's success and customer resistance to switching as factors contributing to WordPerfect's problems. WordPerfect's upgrade problem is a lesson Microsoft should learn lots from. The Office market is highly fragmented, as customers hold on to older versions longer and longer. One reason Microsoft ties new Office features to other products, such as server software, is to pull upgrades.

Problems with Windows versions may have hurt upgrades from WordPerfect 5.1, too. The first truly Windows version, 6.0 (there had been a 5.2, too) suffered from some glitches. I got my first home PC in January 1994 with WordPerfect 6.0 preinstalled. As a long-time WordPerfect user, I was quite excited about the Windows version. But, after a string of problems, I bought the Word 6 competitive upgrade three weeks later from Staples for $130. I knew many other folks buying Windows PCs during that time to make a similar switch. Version 6.1 remedied many problems.

I wonder if WordPerfect 6.0 performance will be an issue raised by both sides in court. Microsoft's reasons are obvious. Novell's possible contention needs some context. Many developers have claimed that in the past Microsoft withheld information that gave its products advantages over competing software. The allegation dogged Microsoft during its U.S. and European antitrust cases. As part of the U.S. settlement, Microsoft must disclose more information about Windows innerworkings to other developers.

So the why Word, and eventually Office, worked better with Windows than WordPerfect could be an important point, particularly viewed in context of the time: The move from DOS to Windows and Windows 3.1 to Windows 95, all in a span of about four years. I'm neither a lawyer nor developer, so it's not my place to speculate on the validity of such a claim.

Microsoft certainly benefited from the move to Windows 95 and being able to synch its major applications release with the operating system. Windows 95 and Office 95 shipped on the same day. Was that anti-competitive behavior or better business tactics? That's a question the court will likely answer.

What about Novell's responsibility? Any acquisition requires time to absorb, and WordPerfect was very much unlike Novell's other products.

Then there's the question of bundling. Back in its heyday, WordPerfect cost about $500 per copy. Microsoft packaged together a suite, with word processor, spreadsheet and presentation program, for about the same price. Three for the price of one is an awfully attractive option. Novell assembled its own suite, but, didn't have the advantage of releasing a suite when Windows 95 launched. Is that Microsoft's fault, Novell's or both? Again, there is another potential issue for the court.

The case is opportunity for Novell to air Microsoft's laundry. I won't guess as to dirty or clean. So far, most antitrust cases focused on Windows. Novell is going after Office, Microsoft's other cash cow product and arguably another monopoly given the product's enormous market share (Remember, I'm not a lawyer). Windows licensing practices played an important role in the U.S. antitrust case. What Office licensing practices might the Novell case expose? The U.S. courts rapped Microsoft for exclusive arrangements. Are there any that a judge might consider anticompetitive? Hypotheticals: Microsoft giving deep discounts to PC makers that carried, say, Office 95 and Windows 95 or cutting exclusive deals with those computer manufacturers for Office only. Would the court consider those possible business practices as shrewd, fair play or anticompetitive?

My point: The issues surrounding the case are complex, and I'd be surprised if they ultimately even remotely resemble the black-and-white positions the companies took today.

Again, that's all in the past; history before late 1996, when Corel picked up WordPerfect for about $10 million, if I recall correctly. And it has absolutely nothing to do with the robust productivity suite WordPerfect is today.

Posted by Joe Wilcox at 03:08 PM

This Week's Twin SMB Reports #

This week, JupiterResearch published two important small-and medium-business reports: "SMB Market: Microsoft's Early Success Shows Way for Savvy Partners and Competitors" and "SMB Sales: How Competitors Can Trump Microsoft by Being Direct." I encourage clients subscribing to the Microsoft Monitor service and interested in the SMB market to review the reports. Please, don't hesitate to schedule an inquiry for additional information; there is plenty of it.

The first report looks at lessons Microsoft's massive $2 billion investment in the SMB market can teach partners and competitors. The report gives Office, Windows and Windows Server market share by version across the entire SMB market (businesses with fewer than 1,000 employees) and two sub-segments, businesses with fewer than 50 or 10 employees. The report also identifies several "pull" product categories that drive other technology sales.

The second report looks at how SMBs buy hardware and software, by channel and purchase trigger. I highly recommend the report to companies selling by direct and indirect means or those looking to improve their indirect sales channels. Highlight: The report found the number of SMBs buying hardware or software direct from the manufacturer increased over 2003. Both reports use the same employee segmentations to present the data.

While both reports offer useful tactical advice, they cannot replace the information conveyable to clients by analyst inquiry. The reports reflect just a small amount of the data collected in JupiterResearch's most recent SMB survey.

Posted by Joe Wilcox at 09:24 AM
November 11, 2004
How's Your SMT 5600? #

Well, I'm on my second Audiovox SMT 5600 Smartphone, as I work through a small problem. It should be noted I bought the phone for personal use, and some informal testing, too.

Out of the box, I ran into a surprising problem with the first phone. People complained of echoey audio. Descriptions were pretty consistent, with people saying I sounded like I was talking on a speakerphone (from a distance) or standing in a tunnel or cave. Result was the same whether I used the built-in microphone or wired headset on the first phone, which I returned to my local AT&T; Wireless store yesterday. The sales person tested it in the store without the headset and concluded an exchange was warranted. Initially, I encountered similar problems using the second phone.

I talked to several people using both phones. I even asked Microsoft evangelist Robert Scoble to call on his SMT 5600, so we could hear how the other guy sounded. He heard problems on both phones. What I failed to do with the second phone, other than with one person: Test without the headset.

So, colleague Michael Gartenberg and I spoke on the SMT 5600 this evening, and he, agreed, the audio was echoey. But with the headset off, to him, the phone sounded just fine. For unexplained reasons, there appears to have been overmodulation with the headset. By the way, Michael has had absolutely no problems with his SMT 5600. I called two other people without the headset. One person still described the sound as ringy. The other said the sound was much improved, but not as crisp as the phone I used previously.

Additionally Robert and I chatted, and he could hear quite a difference between the wired headset than without. For example, the headset seemed to pick up more ambient noise, he said. That's not necessarily a bad thing; sensitivity can be quite good. So, he tried out his headset, the one that came with the phone. I noticed a little difference, more like a sense of some greater distance, but nothing dramatic. I had used an over-the-head set I've had for several years, not the one that shipped with the SMT 5600.

I'd like to thank Michael, Robert and all the other people who helped me work through the audio on both phones over the last couple of days.

The audio problem aside, I generally like the SMT 5600 and agree with Michael's enthusiastic blog about the phone. That said, if the SMT 5600 doesn't work well as phone, meaning people can comfortably hear me, than the other great features are pretty much meaningless. So, this audio problem is something that I would want to finally resolve, probably by buying a new headset. Tomorrow, I will make 100-percent headset-less calls and see what happens. But, I'm hopeful. I'm even considering the possibility my headset--not the one shipped with the SMT 5600--damaged the first phone.

So, Microsoft Monitor readers, I'd like to ask, "How's your SMT 5600?" You can e-mail responses here. Unless objected to in the e-mail, I may post some of the responses but without names in a future blog.

Posted by Joe Wilcox at 03:24 PM

MSN Search Beta Second Take #

In blogs here and here, colleagues David Card and Michael Gartenberg offer their initial reaction to Microsoft's MSN Search beta. The blogs share a similar theme: David jokes about Microsoft�s first search server being codenamed "Underdog" and Michael notes the service isn't working too well today, which certainly reeks of underdog status--and maybe staying there for awhile. (Sometime after I started writing this post, colleague David Schatsky blogged about MSN search, here, and Michael responded here.)

I tested the MSN Search service over the weekend and also saw plenty of problems. I would do searches and get back page not found errors. Since the beta site wasn't officially live, I cut Microsoft some slack. But, today, the site is open to everyone. Like Michael, I encountered numerous problems today.

But, the beta site delivered pretty good results when I could get them. I wouldn't call them exceptionally better than Google or Yahoo!, but different enough to create a solid third place to do difficult searches.

One of the hot features is supposed to be natural language search, but I'm troubled by problems with people not speaking, say, English as their first language. So I searched for "How do I the car buy?" and "How do I buy the car?" The results, here and here, are surprisingly different; or, maybe, not surprisingly different. The second, more proper English phrasing not only yielded different results but the inclusion of paid placements, too.

I next tried "My toilet stuck up it is" (here), which brought back a porn as the first result, and "My toilet is stopped up" (here), with better results. Google results for the same phrases are here and here and worth a comparison.

Last week, David Card asked about a comic book store near JupiterResearch's offices, one with an unusual name. MSN local search term, "Comic Book Store 10016," yielded these results for New York. The store David asked about isn't on the first page. Google results show the store as the first item.

Many news sites are making fierce comparisons between Microsoft, Netscape and Google, and the rekindling of the browser wars. If search is the new browser war--and I don't believe that it is--Microsoft needs do better than fire BB guns at tanks.

Posted by Joe Wilcox at 12:00 PM

MSN Search Beta First Take #

Microsoft hasn't done the best job keeping secrets this week, with widespread news reports foretelling today's launch of a new MSN Search beta (here). The question: How good will be the new search service at uncovering secrets? The new service relies on algorithmic technology developed by Microsoft and not served up by Yahoo!. The answer will be in the testing.

News media interest in Microsoft's search overtures appears to be pretty high, with plenty of comparisons to Netscape and the browser wars. As I explained in an October blog, Microsoft's search quest is more about the Web than Google, as it was with Netscape during the browser wars. Like Netscape, Google poses no serious platform threat to Windows (see blog here). The real threat is the Web and its informational utility that does not require Windows. During the browser wars, Microsoft really waged battle against the Web. Eight years after firing its first salvo, Microsoft is back in the trenches over Web-based search. At some point, Microsoft must also deal with the RSS, or really simple syndication, problem, too, as I previously explained here and here.

Yesterday, I spoke with one reporter who asked repeatedly why Microsoft's search progress has proceeded so slowly. There are many reasons. No vendor just invents a search engine overnight. Microsoft launched its bot for indexing Websites in June 2003 (see blog here). As explained in my July 2003 report, "MSN Search: Microsoft Guns for Google, the Desktop, and the Enterprise," the indexing process takes at least 12 months, just to start. By the way, the report remains highly relevant, with most predictions on Microsoft's search progress being right on track. Slow is the progress the report predicted. I would encourage clients or the news media to review the report and to contact me for additional insight.

Microsoft doesn't need to rush. MSN is a major search player, just not as strong as Google or Yahoo!. Microsoft can take the time necessary to deliver highly relevant search, while looking for the best way to monetize the service. I'm not convinced Microsoft really wants to take out a major partner such as Google, either. Heck, Microsoft even promotes Google technology (see blog here). Microsoft execs may talk of war with Google, but that's just to rally the troops. Microsoft's battle remains with the Web, where Google has successfully capitalized on its informational utility. Like Netscape, Google is in the path of Microsoft's greater battle with the Web.

People forget that Google isn't the first successful search provider with highly relevant results and good brand. For example, I remember when AltaVista was a hot search commodity. Others have gone search supernova and burned out. But, there are several differences that make search more significant to Microsoft today:

* MSN is a separate division, not just a product, that most show profitability. And search, particularly the paid stuff, has proven highly profitable for MSN.

* Proliferation of broadband, Wi-Fi hotspots and even GPRS cell phones are accelerating the information utility of the Web. The Internet is accessible from more and more places and from more and more devices. Search capitalizes on this extensibility in a way Microsoft shouldn't ignore if it doesn't want the Web to (pardon the pun) break the Windows.

* Microsoft's product development is more focused on information than in the past. The approach makes sense for many reasons, such as focusing development around utility and real-world usage scenarios than dumping in features by the barrel.

* As digital content usage increases, consumers have greater need to find that content in a more meaningful way. Microsoft can solve that problem at the operating system level, as Apple also will attempt (see blog here), and extend utility across the network, whether corporate or consumer Internet.

It's a fair bet that MSN will lead the first charge into Web search (see blogs here and here). Long term, Microsoft will seek to make seamless search across the desktop, the Web and corporate network (see blogs here and here). If Microsoft is really smart, the strategy will embrace non-PC devices, too (see blogs here and here).

Posted by Joe Wilcox at 08:19 AM
November 10, 2004
Why the Government Giveaway #

I've been mulling over the Microsoft Solutions Sharing Network, which the company announced early Tuesday. SSN provides governments access to SharePoint Portal Server software for creating customized sites for internal or external collaboration.

Microsoft certainly wouldn't be the first company to offer governments free use of technology. The altruistic view is private business giving back to the public sector. The more cynical perspective is a company offering freebees that would lock governments into its proprietary technologies. I see the real motivation as somewhere in-between the two viewpoints.

Coincidental timing: Microsoft's Monday settlements with Computer & Communications Industry Association (CCIA) and Novell (see blogs here and here), which nicely compliment the SSN announcement. Microsoft has adopted a policy of working more closely with governments, a message underscored in the CCIA and Novell settlements and the SSN announcement. I see the positioning as legitimate corporate policy, and a smart one, too. Microsoft rightly recognizes it's better to work better with governments than against them. There are plenty of good reasons:

* Concept of private business returning something back to the public sector

* Exposing governments to Microsoft technologies

* Improving sales to governments

* Through improved government relations, winning public sector support for promoting Microsoft technologies in emerging, geographic growth markets

* Beating back Linux, which can boast some of its early Windows converts among governments

Generally speaking, SharePoint sites are only fully accessible from Windows computers running the newest versions of Office. While Microsoft has provided a powerful and free utility, greatest benefit would be to users of the company's newest technologies. I wouldn't go so far as to say it creates a Linux-free zone, but SSN wouldn't exactly embrace the Windows wannanotbe either.

SSN is consistent with Microsoft's get kissy/huggy with governments strategy. And it provides them utilities that could foster greater ability to collaborate within and without; that could include technology projects for making more facilities consumable by residents and taxpayers. Governments adopting some Microsoft technologies might also encourage local businesses to do them same.

Posted by Joe Wilcox at 11:06 AM
November 09, 2004
The Halo 2 Time Warp #

People lining up outside stores to buy software at midnight; record-breaking first-day sales; Microsoft winning a major coup over platform competitors. Descriptions of Windows 95's debut? Nope. Halo 2.

According to a Reuters story, here, Microsoft expects first-day Halo 2 sales of $100 million. A companion story tells how 1,000 people lined up outside the--get this, not the CompUSA or GameStop but--Toys'R'US in Manhattan. I hadn't realized Microsoft included time travel technology with the game, because all this really does feel familiar, as in August 1995 and Windows 95.

Michael Gartenberg is better commentator on the game market than I. But, I have to wonder if Halo 2 will be the software that really launches Xbox, the same way Windows 95 really launched Windows. Sure, Xbox is already a toddler--in human years, anyway--and three versions of Windows preceded 95. But as Windows 95 showed, when the software is right, people will buy the platform; and so more vendors will develop for the platform. That feedback loop is difficult to generate, but, as Windows has shown, it's nearest thing to a perpetual-motion machine if the connection synchs.

Posted by Joe Wilcox at 03:54 PM

One-Hit Wonderless #

Late yesterday, colleague David Card blogged about MSN Music's unusual ranking of one-hit wonders. MSN got the approach right, but, as David types, "Long-playing artists that only had one high-volume pop hit is not the same thing as a one-hit wonder."

Definitely, collections are a good idea, because they make music easier to discover. JupiterResearch surveys show that consumers rank music discovery as a top feature they look for in online music stores such as iTunes, MSN Music or Napster. So far, I see pretty good collections packaging going on at both iTunes and Napster.

So what about MSN's list, so derided by David? VH-1 aired the five-part series "100 Greatest One-Hit Wonders" sometime back. VH-1's list overlooks more than a few decades (don't look for 1960's one hitters like Zager and Evans "In the Year 2525" or the Archies' "Sugar, Sugar," both carried by MSN Music but missing from the one-hit wonders list) Some legitimate one-hitters making the VH-1 list and carried by MSN Music: "Hot Child in the City" by Nick Gilder or Andrea True Connection's "More, More, More." Many of the bands on the VH-1 list aren't ever coming back. One song, maybe one album, and they were gone. Many of the most legitimate one hitters, like Terry Jack's "Seasons in the Sun" Los Del Rio's "Macarena," or Debby Boone's "You Light Up My Life" (huge hits in their day, but don't ask me why), aren't in the MSN Music catalog, nor iTunes I should add.

David rightly pegged the biggest problem. He put it in terms of an editor. I'll go further and say that MSN needs a strong music director, someone or some team with exclusive control over content and the good sense to showcase emerging artists and promoting older stuff in more visible and meaningful ways. Apple's iTunes Music Store has the touch of a music director's strong hand and good judgment.

It's new music Tuesday, a day when MSN Music should be showcasing the tunes. I don't see them standing out on the home page, in any particularly strong way. Pretty much the same "top selling albums" list with record covers has adorned the top portion of the page for some time. MSN has added something like five videos since the first 128 debuted. Just added: U2's "Vertigo." It's new at iTunes Music Store this week, too, although Real and Yahoo! Launch had the video longer.

I'd be interested in reaction from David or Mark Mulligan about the difference in song popularity over at MSN Music compared to iTunes Music Store. Top 100 songs for MSN Music and for iTunes. Is there some hidden meaning that "America, F**k Yeah" from the "Team America" soundtrack (both stores carry the album as top sellers) is No. 22 over at iTunes but doesn't make the MSN Music top 100?

Posted by Joe Wilcox at 09:04 AM

It's Finally Here #

This morning, Halo 2 has taken over the Microsoft home page, with audio, too, which is unusual for Microsoft.com. "It's finally here. Earth will never be the same." reads the tagline. Microsoft must mean that Xbox will never be the same. Yesterday, colleague Michael Gartenberg blogged on Halo 2 and explained why. Like him, I got a copy yesterday. Not that I have any time to play the game. It's a busy week that just gets busier. My daughter couldn't figure out the appeal, so we looked at Halo 2 trailers last night. She's not interested, which isn't surprising. Ten-year-old girls aren't the target market. Interested I am, though.

Posted by Joe Wilcox at 08:30 AM
November 08, 2004
Second Take on CCIA, Novell Settlements #

During a conference call this morning, Microsoft General Counsel Brad Smith explained some of the Computer & Communications Industry Association (CCIA)and Novell settlement benefits. My first take is here.

Because I am not a lawyer, I gave guarded speculation about the impact on the European case. Brad Smith made clear that removing major interveners--four through settlement so far (AOL, CCIA, Novell and Sun)--does benefit Microsoft in Europe. He made clear that settlements with AOL and Sun, which are CCIA members, may have facilitated settlement with the trade group. Microsoft's general counsel also explained that CCIA had agreed to drop a claim in Europe against Windows XP, which he said prevented any realistic settlement with the European Union's Competition Commission.

Qualifying I'm no lawyer, the EU case dealt more with past practices, while the CCIA claim added a go-forward element, which is now removed. When asked if settlement would be more likely, Brad replied, "It certainly doesn't hurt."

Today's settlements mean RealNetworks stands alone as the remaining, major intervener. Brad would not discuss settlement discussions, if any. I did see some of his comments as a challenge to Real, particularly emphasis on reconciliation and renewed industry cooperation.

Brad spoke about today's settlements showing "capacity to resolve" disputes that previously had been left "to government to resolve." He spoke about Microsoft's commitment to taking a leadership role to "unite our industry" and to create more jobs.

The positioning is shrewd and compelling. The antitrust cases made Microsoft out to be a bully that used overly aggressive means to crush competitors in emerging markets. But Brad's position tries to make Microsoft into a leader advocating reconciliation and cooperation. Of course, Microsoft benefits greatly, particularly with so many cases in the courts. But, as I blogged here, here and here, Microsoft's current emphasis is greater cooperation with industry and government. I don't see that as a ploy, but as legitimate, long-term corporate policy.

The position also makes Microsoft a rallying point for industry responsibility as a means of diminishing the likelihood of more government intervention, either through litigation or regulation. It's a damn smart position for Microsoft to take and where the company could turn perceived past sins to advantage; suddenly, Microsoft is the great defender, the great cooperator around which other companies can rally. It doesn't hurt that Microsoft can make this stand as a presumably pro-business leadership sets up for another four years in Washington.

In my earlier blog, I said that CCIA and Microsoft as allies work better than as enemies, because of potential government intervention in areas like privacy and piracy. Brad explained some of the policy areas where CCIA and Microsoft would work together: Research and development, including getting government funds for private industry; immigration; Internet access; government and private industry collaboration; and security and privacy. Bitter rival CCIA, representing some of Microsoft's biggest competitors, is now an ally, which gives Microsoft a showpiece for its changed ways, as well as a partner advocating pro-high-tech policy in Washington.

I think Microsoft's strategy presents challenges for Real, particularly in context of last week's U.S. presidential election. The company must cautiously assess how best to proceed in the antitrust cases, whether refining positioning or pursuing settlement. Microsoft clearly is setting up to advocate responsible businesses that cooperate with governments, as precursor to making those parties pushing for government intervention as bad guys. That's going to be a popular message here in Washington, if I read the election results right. And the message might just win some allies in Silicon Valley if there's money to make. More government R&D; investments and pro-high-tech immigration laws aren't bad ways to start making new friends in the Valley.

Posted by Joe Wilcox at 10:12 AM

First Take on CCIA, Novell Settlements #

This morning, Microsoft announced settlements with Computer & Communications Industry Association (CCIA) and Novell. The context isn't rocket science: As I blogged before (here, here and here), Microsoft has favored reconciliation over continued litigation as an antitrust legal strategy; CCIA and Novell will no longer participate as interveners in the European Union's antitrust case against Microsoft.

No doubt, some news stories will rag on about how Microsoft is paying its way out of the European antitrust case. It's true that the earlier Sun settlement essentially silenced the case's main protagonist. I'm no lawyer, so I need to speculate cautiously. But, given that the European's Competition Commission already ruled against Microsoft and that record is before the court, it seems to me that the case has plenty of bite, even without CCIA, Novell or Sun. The question: Would there be more bite if these groups continued their participation? Maybe.

CCIA is a trade group here in the Washington, D.C. area and one that has dogged Microsoft relentlessly through government cases on two continents. CCIA fought against the antitrust deal cut between the U.S. Justice Department and Microsoft. CCIA could have attempted an appeal of the lower court ruling to the U.S. Supreme Court. As part of the settlement, CCIA will not. I've spoken to a few lawyers on both sides of the case, and none saw much hope for the appeal; so CCIA isn't giving up much there. Microsoft gains by finally putting the case to rest. CCIA had been the only party still willing to push for an appeal. Microsoft has plenty of good reasons to finally dispatch the case and get on with business, under the scrutiny of some court oversight.

In what I see as a stunning turnabout, Microsoft will join CCIA, which is a bit comical considering how strongly the non-profit group's president, Ed Black, lambasted Microsoft Chairman Bill Gates and his company over the last five years. CCIA also will get compensation for legal fees, some going back a decade. Microsoft also will make contributions to advance policies in Washington. That's a damn good idea. Legislation like the Induce Act could have widespread computer and consumer electronics industries impact; more legislation may come as Congress and regulators weigh sticky issues like privacy and piracy. Right now a "my enemy is my ally" approach would benefit Microsoft, CCIA and its other members.

I can only laugh at the timing of the Novell settlement. About 10 days ago, Microsoft CEO Steve Ballmer lashed out at Linux--and that meant Novell's SuSe, too--in an executive e-mail. Novell countered Microsoft claims in a stinging point-by-point response. I guess the marketing groups work separately from the legal teams.

Novell will get $536 million from Microsoft, effectively ending antitrust claims regarding NetWare. But the companies could not resolve claims regarding WordPerfect, which is now owned by Corel. Novell gains by dispatching a potentially costly lawsuit and taking in a half-billion bucks. Microsoft also diminishes legal costs, including potential exposure to any possible adverse ruling, and puts away another troubling and distracting lawsuit.

Qualifying that I am no financial analyst, I'm curious about the outstanding antitrust claims against Microsoft. This morning, the company indicated $950 million exposure for remaining claims, or about $200 million more than previously revealed. Microsoft already paid the EU. So where's the exposure? If more settlements are supposed, I would look to the other possible European case protagonists. One really stands out, as much because it also has filed antitrust claims here in the U.S.

Posted by Joe Wilcox at 08:48 AM
November 07, 2004
First Taste of Digital Joy #

This afternoon, I hauled down to Tysons Galleria in McLean, Va., for a look at the Digital Joy both there. I blogged about the program last week, through which Microsoft and Intel have teamed to better market Windows XP Media Center 2005 PCs.

I should have packed a digital camera, but lacked foresight. So, my limited descriptive abilities will have to do. The booth is built around a couch and one of two HP 42-inch TVs (yeah, two). The big-screen TV is affixed to the main structure, which acts as a pseudo living room wall on the inside and placement on the outside for a giant Digital Joy banner. The side portions of the booth, which flank the pseudo living room, contain HP Media Center PCs with monitors more to the front and a bit more back 23-inch (or so I guessed) HP TVs attached to Media Center Extenders. The booth's rear low-placed wall supports the other HP big-screen TV, looking out on the mall and playing the 60-second Digital Joy commercial. So there are four big-screen TVs and two flat-panel monitors; all HP.

I spoke with the managers for the setup at Galleria, also known as Tysons II, and for the Digital Joy booth at Fair Oaks Mall. The Fair Oaks operation is along the I-66 corridor; that's AOL country, but, heck, AOL is a partner for Media Center's Online Spotlight feature. A wickedly determined crew set up the Tysons II booth this morning around 9 a.m., before the mall opened. The Fair Oaks operation opens tomorrow. The boths will stay open for nine weeks.

As much as I liked the Digital Joy booths, I was more impressed with the booth managers. Both were extremely knowledgeable about the Media Center products and more about the marketing positioning and even why Intel and Microsoft chose this holiday season to do big-bang marketing. As the Tysons II Digital Joy manager explained, Media Center isn't new, but this version is the one ready for prime time. The manager knew which ABC TV show on which the 60-second Digital Joy commercial would debut tonight (Hint: Think makeover)--another hint to his depth about the marketing campaign as well as the products.

My big question for both managers was why setup in these two malls. Galleria is decidedly upscale, but I'm not sure it packs in the traffic the way Tysons Corner Center (a.k.a. Tysons I) does; a major highway separates the twin malls. Tysons II seemed pretty busy to me, until my daughter and I stopped into the other mall for a gander at the Apple Store and L.L. Bean. The place was packed! The Tysons II operation manager said both Washington area locations were chosen because of their demographics. He suggested that Galleria's older clientele--and I would say quite a bit wealthier--might have something to do with the location. He also noted there were less kids running around than over at Tysons I (absolutely true). Who wants five or six juniors and missies fighting over the Media Center remote when fat wallet carrying Mr. CEO wants to sit in front of that big screen and check out some instant replays of a Washington Redskins game?

But Mr. CEO wouldn't be buying at the booth. Contrary to my expectations, in-both sales will be discouraged. The manager made pretty clear that Intel and Microsoft would not sell anything from the booth; conflict with retailers is a damn good reason and something I can understand. But I had expected people to be able to order Media Center computers right there in the booth at the Digital Joy Website, using the HP PCs. Not at Tysons II.

If the other booths are as attractive as the one I saw today and the managers as well trained and knowledgeable, Intel and Microsoft might just spread some digital joy this holiday season. Ho. Ho. Ho.

Posted by Joe Wilcox at 04:45 PM
November 05, 2004
Accounting for Office #

Microsoft plans to put more pressure on other developers selling software to smaller businesses. Today, the company announced new small business products that are scheduled to ship in late 2005. On deck: A small-business management suite that includes Office 2003, new product Office Small Business Accounting and an updated version of Outlook add-on Business Contact Manager.

The approach is the right one, as will be explained in one of two JupiterResearch SMB reports scheduled to publish over the next couple weeks. But, given the products are as much as a year from shipping, competitors have plenty of time to rally a response. It's a fair bet Office Small Business Accounting will take on capabilities from Great Plains, as Microsoft extends some feature derivatives downward. The early product build shows tremendous Office integration, particularly with Outlook.

The integration means--and not could mean, but would--trouble for developers like Corel, Inuit, OpenOffice or Sun. In the enterprise, products like Windows Server and Exchange Server act as levers pulling desktop Office sales. Client-relationship management and enterprise resource planning also pull along desktop software sales. JupiterResearch surveys show a similar tendency among smaller businesses, but with a catch: Server software penetration is fairly low across most of the SMB market compared to larger businesses. So Microsoft is looking to pull Office sales along the desktop, using accounting software that integrates tightly with the productivity suite.

The approach is well thought out. Now it's up to Microsoft to execute. The early product build shows features designed with the smaller-business in mind, such as collaboration and data sharing across a peer-to-peer network. Look and feel should be familiar to anyone that has used Office. But that's a problem for Microsoft. One-fifth of SMBs don't use a productivity suite whatsoever. Office 2003 has done well among SMBs, but nearly half also don't plan to upgrade or buy the productivity suite.

I see the untapped market and those SMBs skipping Office 2003 as opportunities for competitors. Now, not a year from now, would be a good time for, say, a Corel and Intuit to put together a tight productivity suite/small-business accounting bundle. Missing: CRM, something Microsoft will offer with Business Contact Manager 2.0.

In some ways, the new products are incidental to what's going on around them. The new small-business software results from collaboration between the Office and Microsoft Business Solutions teams. The collaboration foreshadows big changes ahead.

Some context: Office is Office's biggest competitor on the desktop and JupiterResearch surveys show an enormous amount of fragmentation, meaning many versions in use, among larger businesses. More big businesses planned to continue running Office 97 this year than upgrade to Office 2003. So Microsoft has been looking to extend Office's appeal to more big businesses and to increase adoption among smaller businesses.

My report, "Microsoft's Integrated Innovation: Weighing up Customer Benefits, Risks," explains how Microsoft is trying to extend Office's appeal through integration along the vertical stack with server software. But the integration doesn't stop there. Microsoft also is looking to extend integration to other desktop software, such as accounting and CRM, and in markets where saturation of the company's own software doesn't drag sales.

Back in July, at Microsoft's annual partner conference, Microsoft Veep Allison Watson put the opportunity for Business Solutions as double that of Information Worker by fiscal 2008. Her context was partner competencies, but those align closely with Microsoft divisions and their products.

Based on Allison's presentation, I assume Microsoft sees huge upsell potential for its Business Solutions products, potentially eclipsing those from Information Worker, where Office is one of the two cash cow products (Windows is the other, of course). On the one hand, Microsoft wants to extend those products downward to the SMB market, which accounts for about half of revenues. But also upward from what Microsoft calls the midmarket into the enterprise. Office is the glue binding both market extensions together.

Over time, I would look for increased collaboration between the Information Worker and Business Solutions groups. The majority of big businesses already have some version of Office on the desktop. The product is a major asset for pulling along sales of other products. If companies have Office and are reluctant to upgrade every couple of years, maybe Microsoft can sell them something else that integrates with Office. Hence, Business Solutions products and also new server software, such as SharePoint Portal Server, Real-Time Communications Server and Rights Management Services, that integrate tightly with Office.

Posted by Joe Wilcox at 12:56 PM

Smart Watch Goes to the Movies #

Starting Monday, Microsoft's MSN Direct service will add a new movie channel, which will provide Smart Watch owners with show times at up to 10 local area theatres. The new channel augments the existing lineup, which has extended dramatically since the service debuted last year.

Microsoft and its partners have made great progress with the Smart Watch concept and associated service. I have had a chance to use a Swatch Paparazzi, new Fossil FX3005 and preproduction Suunto N3i. Results are encouraging. Paparazzi has incredible battery life, compared to the others, going eight days from the first recharge and now more than eight days after the second (specs are eight to 10 days use per charge). The charge is so long, its almost to a fault. The lower amount of days kept me on watch about recharging the watch.

But, the new Fossil scores big for style, which, admittedly, is subject to personal taste. Honestly, I was unimpressed with the first Fossil releases. To me they looked, well, cheap. But subtle changes in the metal case, strap and clasp go a long way. The new Fossil is the first of the Smart Watches I would pay for. Yup. I would plunk down $199 for the timepiece. The watch has the kind of style I would expect from Fossil. Even my wife praised the watch, and she's one of those artist types with finicky tastes (she does think it's too large still).

I'm enthralled with the new watch faces, too. The earlier Fossil watch faces didn't much grab me. Not only are the new ones better, there are many more of them. Besides styling, vendors can greatly differentiate their timepieces with watch faces. Paparazzi watch faces are nifty, but I would like to see more of them.

Speaking of Paparazzi, I've been showing the Swatch to just about every teenager I meet. A surprising trend has emerged, anecdotal as it might be. Maybe eight out of 10 kids I ask if they would wear Paparazzi give a similar response: "Well, I have a cell phone." Many of these kids don't wear watches. They get the time from the cellular.

The response is significant, as much for its impact on other products. Kids from the late 1980s growing up with computers had very different technology attitudes than their forebears. Same can be said for those starting, say, 10 years later that grew up with the Internet. Now we come to the cell phone generation, which carries high-tech devices and connectivity in their pockets or purses. Heck, my 10 year old carries a Smartphone (OK, she's unusual for the device). At the Neopets tourney she attended last week, about half the young girls there, most between age 10 and 14, carried cell phones.

Colleague Michael Gartenberg will have more to say on smartphones and converged devices in upcoming reports.

Posted by Joe Wilcox at 08:39 AM
November 04, 2004
HP's Dual-Tuner Media Center Notebook #

There's more Media Center news today than just Digital Joy. HP announced the new zd8000 notebook, which packs in dual tuner cards. The TV tuner is contained in a unit separate from the main notebook. The dual-tuner approach means that consumers could record one live TV show while watching another. Colleague Michael Gartenberg explains one benefit of dual TV tuners here.

The zd8000 also comes with other goodies typically found on brawny, desktop Media Center PCs, such as a FM tuner and up to 256MB graphics memory.

HP's overall Media Center strategy shows the value of tenure. The company was Microsoft's lead hardware developer for the original Media Center PC. The culmination is a cohesive set of entertainment products, many built around Windows XP Media Center Edition 2005.

Other hardware and software developers would benefit from seeing how well HP has integrated together its Media Center products and with other products, like printers. I'm not just referring to hardware but the way HP has plugged its software and services into the Windows Media Center interface.

Posted by Joe Wilcox at 03:29 PM

Spreading the Digital Joy #

Today, Microsoft and Intel teamed to aggressively market Windows XP Media Center Edition 2005 PCs, associated products and services. And it's about time. This weekend, the companies will unleash a mass marketing campaign--in print, at movie theatres and on television--advertising Windows Media Center PCs running Intel Pentium 4 processors. Additionally, experience centers will open in 38 locations around the U.S. (two in my area).

I simply can't say enough to praise the approach, which addresses fundamental problems about bringing Microsoft digital entertainment technologies to market.

As I've blogged repeatedly (here and here, for starters), digital media products don't sell themselves. Marketing, the kind Apple has done with iPod/iTunes, is an absolute necessity; more so because Microsoft's cadre of digital entertainment products and services, the majority coming from major partners, make up a complex package.

But mass marketing only addresses part of what Microsoft and its partners really need to sell these products successfully. As explained in my report, "Windows XP Hybrids: Turning Media Center and Tablet PC Potential into Profits," Windows Media Center PCs really need to be experienced to be sold. But as I blogged previously, many retailers lack the wherewithall to sell Media Centers the right way.

The marketing campaign attacks these two problems with a vengeance:

First, there is the advertising, anchored by full 60-second spots that in the first few weeks will run at least as often as Apple's iPod/iTunes ads. Most products don't sell themselves. Microsoft and its partners have left an advertising void Apple has easily exploited. I haven't seen the ads yet (maybe later today), but I expect them to deliver a strong message around broader entertainment, not just music.

Second, Microsoft and Intel will launch the Digital Joy Website, that provides information on Media Center and related products and opportunity to configure and buy them (as of this blogging, the public site is not yet live). Combined with the advertising, Microsoft will seek to distill its complex digital entertainment marketing message down to something the average consumer can easily understand. Apple's music message is simple and much easier to sell. Microsoft has Media Center, which does photos, music, movies, DVDs, radio, TV and online services; plus, there are all the partner products capitalizing on Media Center, such as services plugging into Online Spotlight, MSN Music, subscription music services like Napster and Portable Media Centers, among others.

Third, the experience centers help solve the hands-on problem, where consumers will be given opportunity to get up close with Windows Media Center PCs and associated products and services. The strategy is risky, because some retailers might balk at being partly sidestepped. But, I believe Microsoft and Intel are doing right by taking digital entertainment products to customers and making sure they can get hands on as needed. The two experience centers in my area are oddly placed. One is in a mall in an out-of-the-way Virginia suburb. The other is located in one of two twin malls--both in an affluent and easily-accessed location--but in the higher-end, seemingly less-busy shopping center.

I'll blog about the experience at the experience center, as soon as the one closest to me opens. I must love a good scrap. An Apple Store is in the other of the nearby twin malls. If only the Apple and Microsoft operations were in the same mall...

Posted by Joe Wilcox at 10:26 AM
November 03, 2004
I'm Subscribed #

As I blogged yesterday, the external drive I use to store digital music failed. Right now, I just don't have time to set up a replacement. So, I'm using the crisis as an excuse to really use Napster's 10-bucks-a-month, all-you-can-download subscription service. All my music will come from Napster subscription service.

Half a day later and I'm quite excited about the service and the freedom free downloads give to experiment and try out more different kinds of music. According to JupiterReseach surveys, new music discovery ranks as one of the top features consumers want in a digital music store.

That consumer priority strikes me as appropriate for the original Napster, the first incarnation that, just a few years ago, set off frenzied illegal file swapping. The original Napster provided seemingly unlimited access to digital music. Legal reincarnation Napster 2.0 offers similar appeal through subscriptions. I have to wonder what is the untapped potential in transference of behavior, from all-you-(illegally)-can-download for free to all-you-can-download for near free (How much is 10 bucks a month, anyway?).

Right now, JupiterResearch surveys don't show much consumer interest in subscription music services, but I wonder how much of that is because people don't get the benefits. That's a trend we've seen with digital video recorders (See "PC and Standalone Digital Video Recorders: Strategies to Cope with an Uncertain Market" by colleagues Michael Gartenberg and Andrea Wood), where consumers really have to see products to understand the benefits.

One DVR advantage is time, and the consumer's control of it. There's something to be said about the convenience of recording a show and watching on your schedule. Napster's subscription service is so convenient, it's easier for me to download a track than rip it from a CD I already own. How's that for potentially transforming behavior? I could imagine a cute commercial where instead of burning music to CDs, people literally burn their CDs because they're obsolete.

I'm not advocating doing away with CDs, and JupiterResearch surveys show consumers will be buying the discs for a very, very long time. But services like Napster (with digital download sales, subscriptions or streaming) or Real (with digital download sales or streaming) offer convenient alternatives.

Portability is the big question, and something I won't be able to meaningfully evaluate until more portable devices support Microsoft's "Janus" DRM. Samsung has yet to update the Napster music player so that it will be support subscription content.

Posted by Joe Wilcox at 11:04 AM
November 02, 2004
Better Backup Those Memories #

This afternoon, I've battled a failing external hard drive, which offers a reminder that vendors could do better helping consumers protect valuable digital content.

I use a Sony Vaio VGN-S150 notebook purchased a few months ago. But I didn't like the idea of filling up the 60GB hard drive with digital photos and music (more than 20GB combined), so I bought a 40GB SmartDisk FireLite from Best Buy for extra storage. Digital photos I kept on the computer hard drive, but 16GB of digital music--all legally obtained, I might add--resided on the FireLite.

This morning, the FireLite started making grinding noises that grew louder and more, well, grindy as the day progressed. Fortunately, I keep a duplicate digital music library on the 250GB external hard drive attached to the Windows Media Center PC in the living room. As a precaution, I copied recent digital downloads to the Media Center PC over the wireless network. Hours later, when I attempted to move the files to my hard drive, performance collapsed. The music stored on that drive won't be coming off.

SmartDisk warranties the drive for one year. Assuming Best Buy can print out a copy of the receipt (I trashed the original), SmartDisk will replace the drive. But the content is almost certainly lost.

I worry that consumers place too much trust in computer hard drives, whether internal or external, for keeping precious digital content safe. Every few months I burn everything to DVD, a process that higher-capacity double-layer drives should make easier. I used the FireLite for storage, not backup. But I know plenty of people that use an external hard drive as a backup drive, for convenience. Many more people simply don't back up at all.

That's risky behavior with, say, digital pictures that have high sentimental value and simply cannot be replaced. The moment captured is gone, and there is no place to repurchase the lost digital image. That precious memory would likely be irrecoverable, if not properly backed up.

There is no reason why back-up capabilities shouldn't be built into digital content software, even if consumers don't immediately use the function.

Since many photo editing programs offer CD or DVD burning capabilities anyway, why not emphasize back up, too? Microsoft's Digital Image Suite 10 pops up a nagging back-up reminder every time I start the software. I haven't yet used the mechanism, because the images are backed up elsewhere. But, I will, now that I snapped a bunch more pics on Halloween.

Stores selling digital downloads, like iTunes, MSN Music, MusicMatch, Napster or Real, could easily make backup a prominent feature. Again, CD or DVD capabilities are already built in. At the least, there should be some default for backing up irreplaceable purchased songs. Buying from iTunes, MSN Music, MusicMatch or Real is like buying from a physical store. The music is the buyer's responsibility. Lost music isn't replaced for free. I wonder how many consumers understand this.

Napster is a bit different, and in enough of a way worth making a distinction from competitors; I think Napster should make that distinction clear to consumers, too. For one, Napster does allow redownloads, which is a good failsafe against no or bad backups. For another, Napster offers digital downloads by subscription, not just sales. Subscription songs are identical to those purchased, except for usage rights. Songs are playable on up to three computers, but not burnable to CD. In fact, until I resolve my drive problem, I will just download Napster subscription tunes for awhile and save hard disk space; I figure my revolving playlist of regularly-listened-to songs is no more than 500, but my library is more than 3,500 tunes. So the downloads should more than cover my listening needs.

I do believe it is incumbent on digital content software and services vendors to provide utilities that let consumers easily backup irreplaceable content. But the process must be quick and straightforward. Taking Apple as an example, iTunes to iPod synchronization is automatic. Why not make backup as simple as popping a CD or DVD into the computer drive?

Posted by Joe Wilcox at 03:14 PM
November 01, 2004
Novell Responds to Steve Ballmer #

For anyone who missed it, late Friday Novell posted a response (here) to Steve Ballmer's executive letter (here) questioning Linux's true cost compared to Windows. Last week, I blogged about reasons Microsoft might have to go on another Linux offensive right now.

As for Novell's response, it speaks for itself better than any excerpt I might pull. Most interesting: Novell offers a contrasting view about the use of some third-party analysis.

Posted by Joe Wilcox at 03:46 PM

Shopping at Windows Marketplace #

Over the weekend, I started looking around for a new RSS (that's really simple syndication) reader. I had been using NewsGator with pretty much no complaint. But I don't get paid to only use one company's software. Much as I like NewsGator, time was right to look at other RSS readers.

Natural place to look: Windows Marketplace. Microsoft touts the new Website as just about the best place to find Windows software or hardware. I found surprising limitations to the search capabilities. I conducted my first search using "RSS readers," which yielded eight matches. I noticed that NewsGator was not one of the RSS readers, and so I had planned to ding Microsoft in this blog. But, when I searched for NewsGator, Windows Marketplace found a match in the category "RSS Tools."

Stupid me. Of course, I should have known to search for a RSS reader using the category term RSS tools. Wouldn't everyone? Search for terms "RSS" and "RSS tools" yielded an equal 34 matches. I'm not sure I like the idea of forcing categories onto users, particularly considering that's not how people are used to doing searches.

Irronically, Windows Marketplace delivered different results than did CNET Download.com, which is Microsoft's major partner for the site. The term "RSS tools" yielded a desktop toolbar, while the term "RSS reader" brought up 41 matches overall, 30 of them for Windows XP. Strangely, NewsGator didn't make the list, although Download.com does carry the software.

So, with 34 choices, I started with a familiar company Stardock, which makes Blog Navigator. Stardock is one of those smaller developers that has successfully carved out a niche for desktop utilities. Heck, I remember using Stardock software on IBM's OS/2 back in 1994!

After installation, Blog Navigator recognized that I had NewsGator installed and offered to import my feeds. NewsGator is a product I like, but with some reservations. Set up is excellent, grabbing new feeds easy (there's an icon to click in Internet Explorer) and reading is routine, because the feeds appear as a mailbox in Outlook. Anyone who has used Outlook should find NewsGator to be familiar. Another plus: The software performed flawlessly in my tests. But, I'm not too big on loading too much onto Outlook, adding more megabytes to my bulging Outlook data file or the plain look of the RSS posts in the e-mail format. Here, I wanted less integrated not more. Blog Navigator worked independent of Outlook, kept a separate data file and displayed the feeds in HTML form as they would look on the Web. I assume the software uses Internet Explorer as the rendering engine, because pop-ups blocked.

These advantages aside, the experience collapsed. Because after I fussed around with the options, Blog Navigator stopped fetching feeds. I couldn't fix the problem, which may have been of my doing, so I moved on to another product. Score one big winning round for NewsGator, too (NewsGator also offers more services, such as RSS feeds by e-mail and a very attractive Web-based reader service) UPDATE: Two instances of the program running prevented new feeds. Blog Navigator now works and quite well, too.

For no particular reason whatsoever, I moved on to JetBrains Omea Reader. I started using the software last night. So far--and I'm a long way from any finished testing--the software entices. What I really like, from a surface perspective: Organization of feeds by time, as in today, yesterday, last week and this month. Fetching is fast, too, but not as often as I like. Omea Reader limits fetches to every hour, so I use manual quite a bit.

Over the next couple months, I plan to do lots more product searches like this one using Windows Marketplace, and I may share some of the experiences here on Microsoft Monitor. While big software developers like Adobe, Macromedia or Oracle are more visible, I see the smaller developers as being essential to keeping the Windows platform vital. I see the measure of Windows Marketplace's success as twofold: Evangelizing Windows and smaller developers like JetBrains, NewsGator and Stardock. The importance grows as Microsoft prepares new tools like Visual Studio .Net 2005 in preparation for Windows Longhorn.

I know that Microsoft makes a big deal out of piracy, and so hence the Windows Genuine program I blogged about last week. But the real victims of piracy are smaller developers offering shareware that is stolen or cracked. In the future, I'd like to see a Windows Marketplace mechanism--say, a form of product activation--that helps these smaller companies protect their wares from piracy.

By the way, one of the Windows Marketplace benefits is software supposedly free of spyware (Microsoft says so), referring back to my yesterday blog on malware.

Posted by Joe Wilcox at 09:39 AM

Whos' the Zoo Tycoon? #

Microsoft is ramping up for the release of Zoo Tycoon 2, with announcement for finalists in a content related to the game. My daughter started playing the game last week (sorry, it's not in stores yet, but soon) and quickly put aside Sims 2. Kids tend to switch back and forth between games and she doesn't find the graphics rendering of the people to be as good as Sims 2. Of course, the game is about animals; there, she gives a big satisfied thumbs up.

Regular Microsoft Monitor readers might not realize that Jupiter has a dedicated Personal and Computer Console Games service. Most recent report is Jay Horwitz's "Adult Audience Benchmark 2004: Time for Speculative and Niche Titles Begins Now."

Posted by Joe Wilcox at 09:23 AM

Neopets Tourney and Handheld Search #

Boring can best be described as sitting around a role-playing game store watching 10-14 year-olds play in a Neopets cards tournament while nearby older kids and some 40ish-plus men cower over cards and little figurines. Welcome to my Halloween Sunday, where my daughter competed for Neopets cards at the Dream Wizards in Rockville, Md. The tedium gave me plenty of good reason to take out the HP iPAQ h6315 and surf Websites over GPRS.

Last week I blogged about MSN Search and why Microsoft should offer capabilities specific to Smartphones of Pocket PC phones like the h6315. Maybe tedium leads to wisdom. I tried out different search sites with surprising results. I found that MSN Search delivered an opening screen comfortable for the h6135's screen and resolution. Search results disappointed, returning to a format that wouldn't fit on the screen. The results were simply too difficult to review. Yahoo! treated my handheld like a computer, and I found searching to be cumbersome.

By stark contrast, Google delivered.

Rather than going to the main Google site, I was redirected to google.com/palm, where a search page comfortably displayed on the handheld. Search results delivered in the same size and resolution as the opening page, which made reviewing the results quick and easy. Maybe excellence can best be described as doing one thing really well, and Google does.

I get lots of questions from reporters about Microsoft and bundling tactics, because of the ongoing antitrust case in Europe. I use search as the classic example of why bundling is no panacea. Microsoft has essentially bundled MSN Search into Windows and other products. Bundling may give Microsoft some edge, but it's no surety to market leadership. I see Google's thinking ahead, already formatting search for non-PC devices, as another example of how the better product can win in the marketplace.

I saw that at the Neopets tournament, too. One of the other parents explained that the owner's son often wins, because he has better Neopet cards. A winning strategy is to have about 40 really good cards, and the kid has them--and some of the rarest, most powerful ones, too--because his mom owns a game shop, giving him access to plenty of cards. But skill and luck account for something, too, and the tenure of the players. The owner's son didn't walk away with the trophy yesterday. He took second place.

Likewise, I see that bundling might assure Microsoft of second or, in the case of search, third place. But winning means delivering consumers what they want. And there are branding and marketing considerations, too. As I'll describe in a later blog, the same thinking applies to digital music, another area where Microsoft bundles but Apple continues to outflank its major rival.

Posted by Joe Wilcox at 08:34 AM
October 31, 2004
Malware Maiming #

Yesterday, I dropped my daughter over to a friend's house, and as I was leaving the mom told the girls they couldn't play on the computer because the Internet connected stopped working. I offered to fix the problem, or attempt to, anyway. Turns out there was nothing wrong with the Internet connection; the computer was overrun with spyware.

I blogged about this computer two months ago. So within two months, with Windows XP Service Pack 2 released in-between time, the 14-year-old girl had downloaded something that had infested the computer.

What a mess, too. The spyware--in this instance a great example of malware--had taken over the computer. A search toolbar for some service I never heard of attached to Internet Explorer and reappeared even when clicked to hide. Pop-ups assailed, sometimes 10 to 15 at a time, making any kind of computer use impossible. I attempted to do a Google search for Webroot's SpySweeper, but another search engine replaced Google when going to the site and when conducting the search. I downloaded Webroot's free spyware analysis tool, and when a Web browser opened to show the scan results, another Web page took its place trying to sell a different spyware product.

The malware had filled the desktop with shortcuts to dating, soft porn Webcams, gambling sites and, get this, spyware removing software. I didn't see the irony, because I figured the spyware remover might just be another spyware installer--and one the mortified user might pay for. There simply is no appropriate adjective to describe the mom's horrified reaction to the sites made easily available to her daughter.

Near as I could tell, the malware's purpose was selling other stuff. You want AT&T; Wireless, be prepared for a pop-up hawking another provider. Looking for Amazon? You're going to Buddy's Porn and Worn insread. Sadly hilarious, the pop-ups had so overrun the computer, made using it so impossible, they had no real marketing value.

Since the 14 year old normally used AOL to surf the Web and the company last week announced new security tools, I risked using a free spyware removal tool; LavaSoft's Ad-Aware (I couldn't see making the mom pay for a spyware sniffer when she would get one from AOL). Three scans and 331 spyware traces later and the computer appeared to be malware free. Ad-Aware turned up more than 30 copies of the malware programs hidden all over the computer's hard drive, just waiting for a reinstallation trigger.

A month ago I warned (here) that kids could be the biggest security risk to home computers. This situation is a prime example. I eventually traced the malware to a horoscope program the 14 year old had downloaded. The one program download triggered others, with three malware programs holding the computer hostage.

The mom was aghast, more because the daughter almost always used AOL to surf the Web (She didn't for the horoscope software). Both women just assumed AOL made the computer safe. I consider the expectation extremely reasonable, because AOL does offer pretty good built-in security. But spyware has grown more pervasive and insidious, which gave AOL impetuous to up protective tools. Last week, the online services giant announced AOL 9 Security Edition, which I told the mom to download and install as soon as possible. Parental controls extend beyond AOL to Internet Explorer, or so I understand, which could have prevented access to the soft porn, gambling and other site links dropped on the Windows desktop by the malware.

AOL isn't the only consumer company taking security more seriously. Two weeks ago, Dell launched a spyware awareness program in conjunction with the Internet Education Foundation. I've talked to Dell about spyware, and it's shocking how many support calls the company takes because of computers crippled by malware.

I'm convinced that, for now, Microsoft has done all it's going to immediately do for improving Windows PC security: Release Service Pack 2. It's now up to other companies, which customers are impacted by malware, to step up and fix the problem. Windows XP Service Pack 2 goes a long way to making the operating system safer to use in a connected world. But, beyond ActiveX and pop-up blocking, Service Pack 2 doesn't do much to protect against spyware.

The computer I fixed (or so I hope) was purchased on Aug. 30. Neither the mother nor daughter turned on Windows' automatic update mechanism that would have installed Service Pack 2. I found the automatic update icon on the start menu prompting to be turned on. Service Pack 2 might have warned about the additional two malware installations set off by the first. I'm not sure if it would have stopped the pop-ups, because of the mechanism used to launch them. I will ask for clarification from Microsoft on that matter.

Later that night, I dropped by a disc with Service Pack 2, which the mom installed on her daughter's computer and office notebook.

Posted by Joe Wilcox at 04:26 PM
October 28, 2004
A Sound Contention #

Colleague Michael Gartenberg gives the best reason (here) I've found yet for why Apple hasn't bothered with a video iPod. There simply isn't much source for legal video content. Flipped around, his reasoning could be used to show why video is appropriate for Windows Media-supported portable players.

But, first, in support of Michael's argument but from another perspective, I'd like to point out that it's not a good time for hardware companies like Apple to be releasing products that could be used to illegally play copyrighted material. Down here inside the Beltway, some legislators continue to rally behind the Induce Act. Companies like Apple have every good reason not to give legislators excuse to rewrite a resuscitated bill so that copy-restricting technologies are built into hardware, like portable media players. I won't venture to guess what the bill will eventually look like, or even if it would ever become law, but the rumblings down here are discouraging.

At least with Portable Media Players, like the Creative Zen, TV programming is a source of legally consumable content. That comes back to my original topic. In the Windows world, a portable media device capable of video makes sense because of Microsoft's entertainment strategy. PMCs are designed for natural synergy with Media Center PCs, which emphasize consumption of music, photos and video content, particularly television programs. As Michael so rightly points out: "The only other source of legal video content is recorded TV and Apple at the moment has no interest in playing in that market."

Microsoft is playing in that market, but mindfully to digital content copying or in-home distribution, even content that in the analog world could be legally copied under fair use laws. Microsoft is right to be cautious. I can�t see any reason to restrict copying strictly for personal use. But, apparently, plenty of content holders disagree. Now is not the time for cavalier behavior on the part of vendors like Apple or Microsoft. Granted I�m no lawyer, but I know enough to see that it�s still uncertain how many fair use precedents for analog will apply to digital. Besides, vendors like Microsoft expect other companies to respect and pay for intellectual property use. Why shouldn�t they treat other vendors� IP the same way?

Posted by Joe Wilcox at 11:42 AM

Microsoft's Hacker Primer #

A link from Microsoft's Website leads to this story from the Winter 2005 TechNet magazine. "How a Criminal Might Infiltrate Your Network" is a refreshing and dismal look at hacking and its consequences. Consistent with Microsoft's get with real language approach, the story isn't too technical and quite frank: "Once a network has been thoroughly hacked, the system administrator has three options: update their resume, hope the hacker does a good job running the network, or drain the network."

The Winter 2005 TechNet magazine is dedicated to security, with three other stories on hacking, two on cross-platform security and four others on basics and integration. JupiterResearch surveys show cross-platform security is an increasing concern for the 53 percent of large businesses running heterogeneous platforms.

For anyone looking for Microsoft's Halloween trick or treat, I would consider the new TechNet magazine a treat.

Posted by Joe Wilcox at 11:08 AM

Hey, I'm Genuine #

Today, I joined the emerging ranks of genuine Windows users. I blogged about the new program in September, which is live now here with some enticing free offers.

To recap: The Windows Genuine Advantage program is Microsoft's way of rewarding legal licensees and discouraging piracy. Registered users can access free software and discounted offers not available to other people. I consider the program as a natural extension of product activation--and a necessary one for Microsoft. Several leaked product activation codes account for the majority of illegal Windows XP copies in use, according to Microsoft.

Microsoft's initial response to the program is encouraging, with more than 800,000 people signing up under the pilot compared to the company's more modest goal of 20,000. The pilot launched in English, adding Traditional and Simplified Chinese, Czech and Norwegian languages yesterday. Make no mistake that the program is as much about fighting piracy as rewarding customers. As part of its fiscal 2005 first quarter announcement last week, Microsoft revealed that Windows licenses to PC makers grew six percent year over year compared to estimated 10 percent worldwide PC growth. One reason for the disparity: Growth in geographies with high piracy rates. Linux adoption in the same areas could be another factor, although one I would view less impactful than piracy.

Yesterday, Microsoft expanded the Windows Genuine Advantage pilot program with a bang, offering brand new product Photo Story 3 as a freebee download to registered Windows users. The company introduced Photo Story with Plus! Digital Media Edition (Photo Story 2 also shipped with Digital Image Suite). Absolutely, the software is a nice incentive to register. Microsoft also plans to offer OneNote for six months free use and the Holiday Fun Pack.

I'm not so excited about the Holiday Fun Pack for two reasons. One: The software is such a great showcase of Windows XP digital media features, it's as great a marketing tool as resource for users. Two: Microsoft gave away the software for two years already. I don't see taking away something for free to all Windows XP users as necessarily good customer relations.

I found the registration (a.k.a. validation) process to be easy, although I nearly fumbled it. In theory, customers that have activated Windows wouldn't need to go through this process. Most people who got Windows on a new PC will find that they are in fact not activated and will need to go through the registration process. The user gets three tries, and I fumbled the first two. The process collects no personal information, just the 25-key Windows code from the computer. Type was so small on the key stamped to the bottom of my Sony VGN-150 notebook, I misread the number twice. I'll have to ask Microsoft what happens to folks that make three attempts and fail.

Overall, the program is a smart approach. Microsoft is easing it in through the opt-in pilot. People that choose not to participate still get all the standard downloads; just not goodie freebees. Of course, when the program moves out of beta, the validation process would be required for most downloads.

Posted by Joe Wilcox at 10:00 AM
October 27, 2004
So Why More Linux Bashing Now? #

Earlier today, Microsoft CEO Steve Ballmer sent a memo to customers touting Windows cost advantages over Linux. At first I dismissed the memo, after reading and see how much of the content rehashed information already released by Microsoft. But this evening I got a call from a reporter asking about the significance, as he hadn't seen much new in the memo. And then a lightning bolt flashed the realization: The memo's significance is the timing.

In just over two months, Microsoft is going to pull the plug on Windows NT 4. After a couple extensions, NT 4 life support will end for most companies. It's the end of the line, with no reprieve in sight.

But a whole bunch of companies still run Windows NT 4, about 40 percent of enterprises earlier in the year, but clearly on decline as the plug pulling approaches. But, which operating system do those companies migrate to? Windows Server 2003 is an option, but so is Linux, considering many of those Windows NT 4 boxes were used as single-purpose servers that Linux could easily replace.

So, Microsoft has good reason to get the word out that free isn't free and that it costs a whole bunch more than Linux. And who better to deliver the message than Microsoft's CEO? This is not the forum where I want to discuss Linux versus Windows and what the realistic cost of one versus the other might be. I would encourage JupiterResearch clients to read my reports, "Windows Fragmentation: The Problem with Windows XP Evangelism and How to Fix It" and "Software Assurance: Microsoft's Troubled Switch to Contractual Licensing," for perspective. Another option is requesting an analyst inquiry, where I could go into greater depth than the information the reports contain.

But, I will say this: There are enough companies for which Linux would be a good enough replacement for single-purpose Windows NT 4 Server installations to give Microsoft enough reason to be concerned. Concerned enough for the CEO to rave about how much a bargain paying for Windows is over so-called free Linux (It's not, but how much does it really cost is the question of the day).

I find amazing the coincidence that Steve sent his Linux unloving memo out on the same day that major Microsoft partner Dell announced that it would carry Novell's SuSe Linux on PowerEdge servers. It was quite the shindig, too, with Dell and Novell holding a conference call to make the announcements. Dell doesn't hold many conference calls for this type of partnership, which says something about the weight both companies place on the announcement. And why Microsoft would have all the more reason to say something about Linux today. Lucky timing for Microsoft that Steve sent that memo today, right?

The time is right for Microsoft to come out swinging at Linux again. With the NT 4 support respirator about spent and customer holdouts still hanging onto the operating system but looking for a spry replacement, Microsoft has every reason to make sure migration isn't to Linux.

Oh, damn. I'm going to mix metaphors. It's election season and there's lots of negative campaigning and a rush to get out the vote. Maybe today's memo is more appropriately viewed as Microsoft's last-ditch negative campaigning before the last of big businesses vote Windows Server 2003 or Linux.

Posted by Joe Wilcox at 08:35 PM
October 26, 2004
Some Lessons iPod Photo Teaches #

As widely rumored, today, Apple released an iPod with color screen that synchronizes digital images as well as music. It�s called simply: iPod Photo.

I think Microsoft and some of its competitors could learn some lessons from Apple�s approach to the new product, most importantly from the name and broader marketing. I�ve harped on Microsoft nomenclature before. In the world of overly complex product names, Microsoft is only second to some of its partners. Take Small Business Server 2003, already windy enough, that recently got new name Windows Small Business Server 2003. Somehow the shorthand SBS 2003 was palatable. What now, WSBS 2003? I�m sure those are the call letters to a radio station somewhere in America.

New iPod product name is simple, straightforward, marketable and not too far afield from the brand around which Apple has created increasingly strong awareness. I�ve long argued Microsoft should use shorter product names and that it�s hardware partners should show more imagination than Plucky PC DH-468a or Plucky PC DH-467b.

Apple also has done a remarkable job identifying and capitalizing on consumer interest in digital content. With the original iPod, Apple identified the digital media type with highest consumer interest: Music. The iPod Photo catches another digital media type, the digital image, just as its popularity is starting to peak. In the U.S., more than half of households now have a digital camera. The color screen would let users view album art, which is another nicety.

But there are differences. Apple released iPod into a market where there was no real competition for hard disk-based portable music players. In that early market, Apple could risk higher pricing--and so higher margins--on a $499 music player. The market today is more crowded, with Apple perhaps its own biggest competitor. Given the breadth of music player choices and wide range of prices and the greater popularity of music over digital images, I see iPod Photo more likely as a niche product, appropriately positioned to augment and extend the music player line.

Competitors should watch iPod Photo closely. I suspect Apple will use the product to test how viable iPod would be as a bigger platform around which to deliver other digital media products and services. Already, there is a huge aftermarket of iPod add-on hardware and software, which is the hallmark of a new platform in the making. I would encourage Microsoft, as a longstanding platform provider and one interested in building a digital media platform, to take another long, hard look at what Apple is doing right.

Advertising is one thing done right. I see plenty of iTunes/iPod television ads, and I don�t watch that much commercial TV. Some shows, like "Smallville," run Apple and HP iPod ads every week. Other than Napster, I don�t see much other music service advertising--and absolutely none for other portable music players. I keep wondering how much lack of competing music device advertising contributes to the iPod phenomenon.

When I look at those iPod ads, they don�t say much about the device or iTunes Music Store. Hey, we�re talking shadows dancing to music, right? I remember when Microsoft used to market that way and effectively. Best example: Windows 95 TV ads, which communicated basically nothing informational about the operating system. But the ads conveyed excitement and innovation with their fast-moving images--of people in activity interposed with the Windows 95 desktop and file menu. In those early Windows 95 TV ads, geek was cool and no one was a geek, just cool. They left the impression that Windows 95 would somehow enrich your life and open new horizons, new possibilities. And, as I recall, Microsoft sold a helluva lot of Windows 95 copies, too. Not since, have I seen Microsoft market so aggressively or effectively any of its products. (OK, Windows Server 2003 TV ads were quite good).

I�ve been testing some newer portable music players that support Windows Media Player 10 and WMA DRM music sold at online stores like MSN Music, Musicmatch and Napster. Some of the devices are remarkably good, at least pretty close to the iPod/iTunes experience. The Rio Carbon is a standout example, because of the device�s diminutive size, well-placed control buttons and support for sophisticated synchronization with WMP 10. I might note that Carbon is a simple, but marketable name, if there were some advertising around this and other iPod contenders supporting Windows Media technologies. But that�s one big if, looks like.

Posted by Joe Wilcox at 03:52 PM

LCS 2005 First Take #

Today Microsoft released Live Communications Server 2005 to manufacturing; that means the code is gold. I would expect volume-licensing subscribers to get the software next month and for appearance in other sales channels sometime in December. LCS 2005 will take on a new life, so to speak, when Microsoft releases the Istanbul instant messaging client sometime next year.

From a feature perspective, Microsoft has advanced the product in a fairly short amount a time--and LCS 2005 supports the "federation" agreement for interoperability with AOL and Yahoo! instant messengers. Perhaps most significant--for now, while waiting for Istanbul--is the introduction of a second version.

I would encourage Microsoft customers, partners and competitors to closely look at the differences between the two LCS 2005 versions. The entry-level product supports up to 15,000 "active" instant messaging users per server, which would seem like enough for many companies. Database functions are support by Microsoft SQL Desktop Edition, or MSDE, rather than a separate product like SQL Server.

My feelings are mixed about the MSDE approach. Viewed one way, it's a money saver for some businesses, because they wouldn't need to purchase additional database server software and associated client-access licenses. Looked at another way, LCS 2005 customers would lock into MSDE, which might not work well with other archival software used either by very small or very large businesses (I say very small because one of the two Windows Small Business Server 2003 editions comes with SQL Server). The more expensive LCS 2005 Enterprise Edition would be required to use SQL Server for the archiving/database engine. I'm not convinced the MSDE version is the best approach for growing companies concerned about standardization and interoperability; according to JupiterResearch surveys, most large businesses rank interoperability as a top priority either when buying software or developing applications.

Microsoft competitors and partners should note how LCS 2005 tracks closely with two trends in the vendor's product development: Version differentiation and integration with Office. While Microsoft can argue legitimate customer benefits by adding a second Live Communications Server version, the separation also offers greater revenue potential and in a way consistent with Licensing 6.

I covered the other trend in my report, "Microsoft's Integrated Innovation: Weighing Customer Benefits, Risks." Suffice to say that Microsoft is tying more Office features back to server products. LCS 2005 is no exception. For example, presence capabilities are found in Office 2003 applications like Outlook. One means of checking someone's presence--as in are they online and where are they--is through Office Smart Tags. Two recent reports look at the approach of using Office to front end back-end services: "Microsoft Positions Office 2003 for Enterprise Information" and "Office 2003: Microsoft Attempts to Extend its Franchise Around the 'Smart Client.'"

I expect to see more of this type of vertical integration, as Microsoft looks to Office to pull back-end server sales. Also, Microsot has big interest in giving businesses more reasons to upgrade to newer Office versions--and that's beyond the more mundane wordprocessing or spreadsheet functions. Right now, server software functions extend many new Office features.

Posted by Joe Wilcox at 09:12 AM
October 25, 2004
Windows Partner Pack Packing Google #

Earlier today, reporter Joris Evers from IDG News contacted me about Windows Partner Pack, which contains a Google Web search utility for the Windows desktop. Joris wanted to know how Microsoft could seemingly promote Google technology while competing against it. His story is here. My full response, with a little extra added:

Microsoft's biggest challenge right now is promoting Windows XP's capabilities. JupiterResearch views XP's adoption as modest, at best, with most businesses still running older versions of the operating system and most households running XP and/or another Windows version. Over the last couple months, Microsoft has stepped up XP evangelism, in part by showing the capability of partner products that extend the operating system�s capabilities. The products available with the Partner Pack are consistent with that approach.

At the same time, the MSN division, which brings a fraction of what Windows Client contributes to Microsoft revenues, is looking to expand its search capabilities in competition to Google and Yahoo!. It makes sense that Microsoft would choose to promote competing Google technologies. After all, Windows is Microsoft�s cash cow and most valued asset. And like many other Microsoft competitors, Google also is a valued partner. Notice that Google�s recent desktop search utility, while competing with MSN search capabilities coming in the future, runs only on Windows. So, Microsoft has as much reason to promote Google technology as compete with it.

The apparent contradictory behavior with respect to Google illustrates a much bigger Microsoft problem. The company has evolved from a strictly platform provider into one that also offers applications. Increasingly, the approach puts Microsoft in competition with partners providing valuable technologies for the Windows platform. Google is a classic example of a partner-competitor. While the MSN Search folks may be in hot competition with Google, for the Windows platform Google is a valuable partner. Hence, Microsoft�s apparent contradictory behavior, where executives publicly target Google as a search competitor, while the software giant promotes its competitors� technology in the Partner Pack.

As I blogged before, I see the platforms and applications businesses as creating unnecessary conflict between Microsoft and its partners, a situation that makes Linux more appealing than Windows to some developers. Windows succeeded because third parties could make money on the platform. That is not as sure a prospect when Microsoft�s applications business competes with its platform developers� products.

Posted by Joe Wilcox at 03:49 PM

How `Bout MSN Search from Smartphone #

This morning, over at my analyst blog, I asked (here) about screen resolution on handheld devices, adding to an ongoing blogsite discussion among some JupiterResearch analysts.

I see important implications for Microsoft as it looks to expand MSN Search capabilities, particularly in competition to Google and Yahoo!. Considering that Microsoft makes Windows Mobile software used in some Smartphone and phone PDAs, there's no reason why not to offer MSN Search capabilities as a very visible and usable feature--one configured for the devices' tiny displays.

Right now, the Smartphone market might not be all that big, but it's big enough that on Thursday Microsoft predicted it would sell more Smartphone OS licenses in the current quarter than all fiscal 2004 (July 2003-June 2004). If people carry Web-capable cell phones or Smartphones, why shouldn't they use the Web. Natural functions: Search, weather information, driving directions, movie times, nearby restaurants--all information someone on the go might want to get from a cellular device. But the information needs to be formatted to fit that tiny screen.

The market might not be big yet, but, in the past, Microsoft has grabbed big pay offs from investing early in new markets. Microsoft may have lost the desktop search brand war to Google on the desktop. But the handheld market is one place to reclaim brand identity and consumer interest on devices running Microsoft software. Why shouldn't MSN Search be a prominent option and gateway to information formatted for the Windows Mobile device's display, whether Smartphone or PDA?

Hits still mean something when click-through advertising, affiliate marketing or paid search contribute so much to MSN revenues. Paid search tops the list. I don't see why MSN shouldn't start tapping some of the search revenue opportunities now as more data-centric phones open up new markets.

Posted by Joe Wilcox at 09:41 AM
October 21, 2004
Microsoft Fiscal 2005 Q1 #

This afternoon, Microsoft announced results for its fiscal 2005 first quarter, which ended on Sept. 30, 2004. The company reported quarterly revenues of $9.19 billion, up 12 percent year over year. Operating income was $4.05 billion and net income $2.9 billion, or 27 cents a share.

In July, Microsoft had projected revenue between $8.9 billion and $9 billion and operating income between $3.7 billion and $3.8 billion, which includes charges for employee stock compensation. Earnings-per-share estimate was 25 cents, including stock compensation.

Four of Microsoft�s seven business divisions--Client, Information Worker, Server and Tools and MSN--posted operating profits. Two of the money-losing divisions--Mobile and Embedded Devices and Home and Entertainment--cut their losses by huge amounts, about 40 percent and 50 percent, respectively.

For its fiscal 2005 second quarter, Microsoft projects revenue in the $10.3 billion to $10.5 billion range and net operating income between $4.2 billion and $4.3 billion and earnings per share of 28 cents a share, including stock compensation.

For fiscal 2005, Microsoft slightly raised projections, to between $38.9 billion and $39.2 billion, operating income between $16.4 billion and $16.7 billion and earnings per share between $1.07 and $1.09.

Software licensing contracts, which go on the books as unearned renew that is realized as revenue over time, continued to impact Microsoft revenue. Unearned revenue declined $395 million to $7.78 billion, of which $4.8 billion is from volume licensing. Unearned revenue by business segment: Client, $2.706 billion; Server and Tools, $2.31 billion; Information Worker, $2.388 billion.

Microsoft continues to see strong renewal for Enterprise Agreement, which is the company�s highest-level volume-licensing plan, of between 65 percent and 75 percent. According to JupiterResearch surveys, about 43 percent of big businesses subscribe to Enterprise Agreement.

Breakdown by business division:

Client revenue was $2.99 billion, with operating income of $2.39 billion for a 7 percent and 6 percent year-over-year increase, respectively. Windows OEM licenses--that�s to PC manufacturers--grew 10 percent. Microsoft estimates that worldwide PC sales grew 10 percent during the quarter. But, Windows OEM license growth, at 6 percent, trailed PC growth. I expect this to be an ongoing issue for Microsoft, as growth shifts to geographies with higher piracy rates. The disparity between PC shipment growth and Windows OEM licenses isn�t surprising.

Server and Tools revenue topped $2.23 billion, with an operating profit of $701 million, or year-over-year increases of 19 percent and 84 percent, respectively. Microsoft estimates that Windows Server shipments grew 18 percent year over year, faster than its 16 percent growth estimate for server hardware. Server application revenue grew 20 percent year over year.

Information Worker revenue was $2.56 billion, with an operating profit of $1.89 billion, for year-over year growth of 14 percent and 18 percent, respectively. A 13 percent increase in volume licensing and retail packaged product growth fueled the division�s year-over-year gains.

Microsoft Business Solutions revenue was $160 million, with an operating loss of $41 million; that works out to a year-over-year increase of 9 percent and decrease of 40 percent, respectively.

MSN revenue was $540 million, with an operating profit of $77 million, or year-over-year growth of 10 percent and 35 percent, respectively. Twenty-three percent increase in advertising revenue, largely from paid search contributed to growth, contributed greatly to the division�s quarterly results. I remain concerned that MSN revenue is so closely tied to paid search services provided by a major competitor. Over time, the division�s efforts to diversify and broaden advertising revenue should offset some of the risk.

Mobile and Embedded Devices revenue was $69 million with an operational loss of $20 million, or year-over-year increase of 30 percent and decrease of 41 percent, respectively. The division cut its losses by 40 percent, which is continued sign of improvement. Microsoft sees strong Smartphone license sales; during the fiscal second quarter the company expects to sell more Smartphone licenses than all of fiscal 2004.

Home and Entertainment revenue was $632 million, but with an operational loss of $142 million, for year-over-year growth of 9 percent and decrease of 41 percent, respectively. The division cut its losses by about a half, another indication that profitability could be achieved by fiscal 2007, as projected by Microsoft. Xbox revenue increased 23 percent year over year, or $71 million; $58 million decline from price reductions offset $129 million Xbox software and console revenue. Increases in Xbox software sales helped decrease the division�s losses in the quarter. Microsoft expects the Nov. 9 launch of game title Halo 2 to benefit Xbox during the second quarter.

Posted by Joe Wilcox at 04:55 PM

An iPAQ h6315 Story #

Last weekend, I took my daughter and a friend to one local mall, where I shopped at the Border's Books. I have this ongoing problem where when my caffeine level falls below a certain threshold, my memory goes with it. I wanted to check for the DVD collection of a BBC program and just couldn't remember the show's name. Funny that I recalled the much longer Web address just fine. So I pulled out my HP iPAQ h6315, connected to the T-Mobile hotspot, shot over to the Web address and realized how stupid I must be not to remember pretty simple "MI5."

For my uses, the h6315 proves to be a useful hybrid device for telephony and data. The Web is my main source for information, and the h6315 means I can get at the Web easily on the go.

Unfortunately, I can't say that opinion is universally shared about the phone PDA. During the same mall visit, I stopped in the local T-Mobile store where I purchased the h6315. I got to talking to the sales guy, who expressed surprise that I remained satisfied with the device. His shocking reason: My unit was the only one not returned. He said the store effectively had 100 percent return rate on the device.

The sales guy said there was no consistency to the reasons people gave for returns, which suggested to him that buyers had unrealistic expectations above the h6315. I would agree. Colleague Michael Gartenberg is more the expert with these kinds of devices, so I defer to his good judgment of the h6315 and other converged phone/PDA devices. The JupiterResearch report, "Next-Generation Handsets: How to Succeed in Wireless Without Really Converging," lays out some pretty clear best practices that could easily apply to the h6315.

At one point, I, too, considered returning my h6315. I had some early problems with Bluetooth connectivity (turned out to be a faulty headset) and getting e-mail (turned out to be a T-Mobile account error). But, I persevered, where others might not have been so forgiving. I suspect that some folks shopping for the device may have had unrealistic expectations about its capabilities and limitations.

The h6315 is big and, from my perspective, more a data than phone device. I wouldn't use it for phone calls without a headset, which means I strap the h6315 and Bluetooth headset to my belt when I'm out and about. I feel like a geek so outfitted and absolutely would prefer a smaller device with similar capabilities. But I work out of a home office and don't commute on a daily basis. If I did, I might well have returned the h6315, too.

The device's phone features are fine; I've got no complaints. But, in many situations, I make calls using a stylus and touch screen. I don't mind, but the method is reminder that the h6315 is data-oriented and not just for voice. I can imagine some people might tire of this process quickly. With the stylus, some functions that are one-handed on a regular cell phone are two-handed with the h6315. These little things--size, complexity and usability--added together wouldn't be so little considerations for many people, apparently.

Funny thing, I would say that HP and T-Mobile have done a really good job with extending Windows Mobile 2003 features. Documentation is excellent. Wireless capabilities are outstanding. E-mail integration using T-Mobile's Web utility is near flawless. Lots of other extras show great attention to detail and efforts to make the h6315 really usable as a phone/data device. But those efforts don't necessarily make the h6315 the right device for most people.

Michael warned me to wait. Right now, he's hot on the Audiovox SMT 5600, which he describes as the "near perfect Smartphone." The SMT 5600 is a phone, but with extended data capabilities. I've been tempted by it. But, right now, AT&T; Wireless offers the device. Too, bad I switched from the carrier to T-Mobile for the h6315. Otherwise, I would strongly consider the smaller, lower-cost Smartphone.

I'm happy enough with the h6315, but my no means in love. I would be happier if HP/T-Mobile offered an upgrade to Windows Mobile 2003 Second Edition with Windows Media Player 10. My expectation is low, though, if returns are as high elsewhere as they are at my local T-Mobile store. I hope they are not.

Posted by Joe Wilcox at 11:57 AM
October 20, 2004
Paparazzi #

Today, Swatch joined Fossil, Suunto and Tissot as manufacturers of Microsoft Smart Watches. I consider Swatch a big win for Microsoft that could bring Smart Watches and the MSN Direct service to a younger and more diverse audience than the first-generation timepieces. In typical, Swatch style, the new watches follow a theme, in this case Paparazzi, which is the name of the new timepiece line.

Paparazzi owners get a special channel delivered by Time Out, with information on local bars, hangouts and other locales. Keeping with the Paparazzi theme, Swatch is running a sweepstakes for meeting celebrities. Celebrity sightings delivered over the channel would fit nicely with the Paparazzi theme and maybe generate community around the brand and watch.

Community and buzz are what Microsoft Smart Watches could use more of right now. Apple's success with iPod shows the importance of brand building that sustains sales beyond the initial hype. I see the iTunes Music Store, and the kind of youth-oriented, community experience Apple creates there, as playing an important role in brand energy around iPod. Microsoft and Swatch could use Paparazzi to build some real energy and excitement around Smart Watches. I can't say that Paparazzi will be the next cool thing, but the approach is a good start. Much also will depend on the usefulness of the entertainment information delivered over the special Swatch channel.

Swatch is the first Smart Watch manufacturer to deliver specialized content, which I hope foreshadows a similar approach by the other timepiece makers. Why shouldn't content, as well as style, be a differentiator?

The Paparazzi launch comes with some important pricing changes for the MSN Direct service. Microsoft has adjusted the tiered model so that some basic content services are available for free. This means that some news, weather and stock information would be ready to use with a new watch. As explained in my report, "MSN Direct Puts More Information on the Wrist," most consumers would be unwilling to pay for content. The people most likely to pay happen to be the same folks most likely to be a Smart Watch early adopter. But Microsoft needed to rethink services pricing for the mass market. The new tiered structure makes sense. Some stuff free with other channels available on two pricing tiers. In a nice touch, Microsoft now offers prepaid MSN Direct cards, so that people buying Smart Watches as gifts can also purchase content channels.

Paparazzi watch styling is pretty good. I have the red Paparazzi Swatch (other colors are black, blue and orange). Reaction from my wife, daughter and some female coworkers: "It's too big!" Definitely, the new generation of Smart Watches are smaller than those launched last year. I've been wearing a near-final Suunto N3i for about three weeks. Suunto released the new Smart Watch model last week. It's thinner than the original and sports a leather band that is much more comfortable than the plastic one found on the N3.

As for Paparazzi's size, I got a warmer reaction from some teenage girls, which cooed over the style and size. I wasn't surprised, considering teenage fashion. Most teenagers I know dress to be noticed, whether Britney or Punk, and a big watch can be quite fashionable. The watch is no bigger than many Casio G-Shocks, and I see plenty of young men or women wearing those.

I don't have research data to validate pricing, but I am cautious about a $150 watch targeted at the youth market. And the pricing is definitely at the high end of the Swatch line. On the other hand, people will pay for style or cool. That's where the Paparazzi branding, content and sweepstakes could make a difference.

Microsoft and its partners have work to do before the Smart Watch is a mass-market product. Absolutely smaller sizes and lower pricing would help. But the smaller Suunto watch and Swatch Paparazzi are positive advancements. If the old adage is true that Microsoft gets products right on the third version, version two looks pretty good.

Posted by Joe Wilcox at 10:42 AM
October 19, 2004
Istanbul #

Earlier today, Microsoft announced the new Office messaging client, codename Istanbul, which is scheduled to ship first half 2005.

Through Istanbul Microsoft plans to bring disparate messaging capabilities, such as IM and telephony, right into Office. To get there Microsoft will deliver new identification capabilities to its server products and the hybrid 'Live Communications' IM client. So, from the IM client, a user would either be able to extend availability through call roaming or check a coworker�s availability, going so far as to call right from the messenger. The utility would make sense in businesses where employees work together but connect to outsiders, such as call centers, tech support servicers or doctors� offices. Additionally: Companies with roving sales forces.

Companies could install the server and client software to work with their existing PBX and PSTN phone systems or as part of new Vo IP deployments.

Istanbul is yet another Microsoft effort to pull technologies into Office and so extend the suite�s utility. Remember that address book, calendar and e-mail features existed in separate products before Microsoft brought them into Office through Outlook, which hooked into Exchange Server. The Live Communications Client will bring IM, telephony and identity services into Office, but, again, connected to a server product.

Istanbul won�t be right for every customer. Many businesses won�t want the level of integration with Office, IM and telephony or to pay to add additional server products. So, it would make sense for Microsoft to continue advancing Windows Messenger development.

Posted by Joe Wilcox at 06:57 PM

The Plus in Plus! SuperPack #

Today, Microsoft released a new add-on pack for Windows XP: Plus! SuperPack. The new product basically combines Plus! for Windows XP and Plus! Digital Media Edition and makes them available for lower cost then if purchased separately. So, nothing really new there. What is different and matters more is presentation.

Back in a January blog, I compared Microsoft's Plus! Digital Media Edition Website to that for Apple's iLife. While Apple iMovie product information enticed, "You're the producer. You're the director," Microsoft Movie Maker 2 info droned on about "effects and transitions." The SuperPack Website is a refreshing change. "Turn your home movie into a Hollywood production," or "Lights, Camera...Action!" are big improvements over "50 new video effects and transitions."

The improved Plus! marketing is a positive improvement, consistent with the redesigned microsoft.com and revamped Windows XP evangelism. What I'd like to see is some serious TV advertising showcasing Microsoft and partner digital media products. Look at Apple and iPod, which is all the rage. Apple does some serious marketing around the music player. Not just Apple. During last week's "Smallville," Apple and HP ran iPod ads. The one featured U2 and the song "Vertigo" and the other country dancers and hip hop.

Spreadsheets of JupiterResearch show the benefits of aggressive, targeted marketing. Microsoft's complex digital entertainment strategy could use some other marketing venues where more people are likely to see it. I'm enthusiastic about Microsoft's amazing marketing presentation turnaround that really starting to coalesce over the last 90 days or so. But, making ad copy more appealing at microsoft.com or product Website pages only catches people coming to Microsoft. Now, it's time to take the message to the people.

Posted by Joe Wilcox at 03:01 PM

More on Processor Licensing #

Late this morning, I received an e-mail from a reader contending that I hadn�t done my "research" or looked at "historical pricing models" for my blog about dual-core pricing. The author claimed that Microsoft is "implicitly billing for changes in CPU performance." One of his examples: "Windows Server does distinguish [Hyperthreading] CPUs (and allows them), but cuts the number of CPUs supported out the box in half. You can therefore only have two HT CPUs, or two normal CPUs."

I would agree Microsoft charges some customers more, but I don't see it as being based on hardware performance.

Generally speaking, Microsoft is taking a more server-centric approach to software licensing, something I wrote about in the report referenced in this morning's post. In the process, Microsoft has quietly raised prices for some customers on many products--increases wrapped in new features, or changes in software performance. I don't see a direct link to increasing hardware performance. I see the pricing changes as related to software performance/features.

What's happening takes place on two fundamental levels: The first is creation of new server software products (and associated client-access licenses) that tie to Windows or Office. The second is increased software stratification, with the introduction of new product versions of the same product family, with differentiated features.

An example of the first would be introduction of Project Server or the forthcoming Visual Studio .Net team version. Microsoft spreads out features and extends them so that where once the company shipped just a desktop product, a more costly server version is required to use some features. In the case of Project 2003, the Standard version doesn't really work with the server product; that took away something customers had before. The upgrade would compel some customers to buy up to the Pro version, which I would regard as a hidden price increase.

Good example of the second would be the release of six Office 2003 versions, with some differentiated features. While all six versions support XML, four versions rely on Microsoft schemas. Customers looking for user-defined schema support would have to purchase one of two Pro versions. For customers with heavy Standard installations, the switch could mean paying more for Pro, depending on volume licensing, whether on a plan or which one; hence, for some customers, a hidden price increase. The increased differentiation is seen in Windows Server, too, where Microsoft has spread differentiated features and performance among more versions.

I see the licensing fees highlighted in the reader's e-mail as being more a function of this differentiation and Microsoft's strategy of getting customers to buy up. I don't see a direct tie to processor performance. So, I don't disagree with what he pointed out, just the reasons for the licensing changes.

I'm not going to value judge the practice. Microsoft can legitimately argue that customers benefit from having more versions to choose from. But an argument could be made that customers pay more for performance, which goes to reader's point. But, the way I see it: Microsoft charges more for delivering more software performance, not increases based on the number of processors. A legitimate business case can be made for creating "buying up" situations. Plenty of companies use the practice. Apple doesn't sell one iPod, but five different-color minis and two regular models. Customers looking for a bigger capacity pay more than those looking for less. Microsoft's increased differentiation around features and performance also delivers more customer choice.

The reader asserted that his expected higher pricing for 64-bit systems shows Microsoft charges more based on hardware pricing. That assertion means little until products are released and priced. Still, I also wouldn't be shocked if 64-bit versions cost more, But, again, I see that as a function of increased software differentiation/performance.

One more point: Even where there are apparent, hidden price increases, they don�t necessarily apply uniformly. Increasingly, I see a stratification occurring in Microsoft's customer base around volume licensing. The Haves, those willing to pay up front under a two- or three-year contract, pay less while the Have-Nots must contend with higher costs as Microsoft extends the vertical stack and releases more and more server products.

Posted by Joe Wilcox at 01:18 PM

A Sensible Licensing Policy #

Microsoft's dual-core licensing decision is a good one, and the right stance to take.

Intel is developing microprocessors that are more like two chips in one, which are slated to be released next year. Recently, some news sites raised fear, uncertainty and doubt about whether Microsoft might choose to license server software as if the new processors were two chips rather than one. The FUD expressed in these news stories was shortsighted.

Microsoft's decision makes sense for a couple of reasons:

Consistency. Technology advancement has occurred at a rapid pace, with chipmakers like Intel releasing increasingly faster processors (By measure of Moore's law, doubling performance about every 24 months). I don't recall that Microsoft charged customers or PC makers more money for these performance increases. It's not like people buying the first 1GHz processors paid more for Windows because they could do more with the operating system then, say, with a 500MHz processor. And Microsoft could license this way, if the company chose to do so. Microsoft owns the software, not the licensee.

Related is Microsoft's earlier decision regarding multithreading processors for desktop PCs. Windows XP treats a multithreaded processor as if it were two separate chips, as can be seen by looking at the processor section in Device Manager (Technically, that's an oversimplification, but on point enough). Microsoft could have argued that the technology advancement amounted to two processors and so necessitated a different licensing policy. Such a move wouldn't have made good business sense, for lots of reasons, whether viewed from public relations, PC maker ire, customer pushback or Linux prognosticators pointing fingers at higher pricing. I see the dual-core decision as being fairly consistent with Microsoft's past licensing practices, despite the different ways server software is licensed compared to the desktop.

Server software sales. Microsoft is in the early Windows Server 2003 adopter phase and plans to release either new server software or upgrades over the next 12 months or so. At the same time, as explained in my report, "Microsoft's Integrated Innovation: Weighing up Customer Benefits, Risks," Microsoft is increasing integration off the vertical stack by adding more server products that leverage off the hefty Windows and Office install base. Microsoft wants customers to buy more server software and associated client-access licenses. Charging more for server software on dual-core systems might discourage sales in a market that already is fragmented--meaning customers running several versions of the same software--and hurt sales of adjacent products. Microsoft has more to gain from CAL and adjacent software review then from charging an extra processor fee on the server.

Of course, there is the Linux dilemma. Microsoft faces the strongest Linux threat on the server. How appealing would, say, Windows Server 2003 be if companies had to pay twice as much on newer servers than old ones? Such a licensing mechanism could encourage more Linux experimentation or discourage adoption of new hardware, the latter scenario sure to tick of Microsoft hardware partners. Both scenarios could make Windows Server 2003 a less attractive platform, to businesses buying the software and to server manufacturers.

Microsoft made the right decision, and it really was the only one to make.

Posted by Joe Wilcox at 08:55 AM
October 18, 2004
New Windows Server Roadmap #

Today, Microsoft clarified its Windows Server roadmap, available here. For the news media hung up Windows versus open source/Linux, look no further than the revised roadmap for Microsoft's response. For 2005, Microsoft plans to deliver important server software upgrades in many categories.

First, the basic roadmap:

Second Half 2004: Windows Server 2003 Service Pack 1 and Windows Server 2003 64-bit betas

First Half 2005: Windows Server 2003 Service Pack 1, Windows Server 2003 64-bit Editions and Windows Update Services

Second Half 2005: Windows Server 2003 R2, Windows Storage Server R2, Windows Server 2003 High Performance Edition and Windows "Longhorn" Server Beta 1

2006: Windows Server 2003 Service Pack 2 and Windows "Longhorn" Server Beta 2

2007: Windows "Longhorn" Server

As for Linux, Microsoft's greatest threat remains on the server. Fresh data from the small- and medium-business market shows a dramatic drop off in Windows NT 4 installations, with a shift toward Windows Server 2003. When JupiterResearch does its next enterprise software survey, I expect to see an even more pronounced trend among bigger businesses. I would consider businesses moving from NT 4 Server to Windows Server 2003 to be least-likely Linux candidates, at least from widespread deployment. I do expect to see NT 4-to-Linux migrations for some single-purpose servers.

More broadly, Microsoft continues to drive a more componentized approach to Windows Server releases, which aligns with volume licensing programs. I expect to see similar approaches taken with development and release schedules of other products, whether desktop or server.

While some news media outlets might cast Windows Server 2003 R2 as Microsoft's way of giving something, anything, to volume licensees so they won't bolt between Windows Server 2003 and Longhorn releases, I see the situation differently. Microsoft is in the process of aligning much of its product development and release schedules with volume-licensing changes and how enterprises realistically buy software (In an upcoming report I will explain why the volume-licensing approach that works for bigger businesses stumbles among SMBs). Rather than big, splashy product releases, Microsoft is putting more emphasis on delivering incremental value over the life of volume-licensing contracts. Thus, the more componentized approach.

Of course, there are risks, as explained in my report, "Microsoft's Integrated Innovation: Weighing up Customer Benefits, Risks," related to increased cost for some customers and increasing stratification of the Microsoft install base along volume licensing.

Microsoft is stacking up an impressive cadre of 2005 server software upgrades. Non-volume-licensing customers beware: It will cost you. Microsoft competitors, some of these non-licensing customers are ripe for pilfering.

Posted by Joe Wilcox at 01:05 PM
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